Female founders on the rise? Yes and no.

Female founders on the rise? Yes and no.

THINX. Stitch Fix. Brandless. More and more companies founded and run by women are making a splash in the startup scene. Women-led companies are generating more revenue with less investment, yet make up only 20% of the market. Data from 2017 shows an astonishingly low 2% of venture capital is invested in female-founded companies 

With a heightened awareness and focus on diversity and inclusion, one would assume a more gender-balanced landscape would be emerging. Ironically, startups drive innovation while also reinforcing archaic standards. Why is this still the case in 2018 and how do we change it? 

How we got here 

Social norms – Watch 10 minutes of a Mad Men episode if you need a quick reminder of the relatively recent norm of gender roles in business – women primarily held supporting roles and felt obligated to endure the sexism and misogyny their male colleagues dished out. Progress has clearly been made in the workplace, but the #MeToo movement recently exposed how much more is still needed.  

Biases exist around women’s competence. When a woman does get a seat at the table, she still faces barriers that her male counterparts do not. Last year the Huffington Post reported on an experiment originally tweeted by Philadelphia writer and editor Martin Schneider. He and his direct-report, Nicole, switched email signatures for two weeks – essentially conducting business under the other person’s alias.  

Martin tweeted, “I was in hell. Everything I asked or suggested was questioned. Clients I could do in my sleep were condescending. One asked if I was single. Nicole had the most productive week of her career. I realized the reason she took longer is [because] she had to convince clients to respect her.” 

This where “mansplaining” comes in, a man explaining something to a woman in a condescending or patronizing manner. There’s an assumption that women aren’t subject matter experts. They are questioned harder on the facts, and often must give more compelling investor presentations rooted in financial projections.  

Lack of understanding – Many female-founded companies are tackling issues uniquely or primarily faced by women. We’ve seen it labeled as the kiss of death: “I’ll have to ask my wife.” The problem is, their wife is usually not the target customer of the company.  

Comedian Tina Fey gives a great example while being interviewed on David Letterman’s new Netflix show, My Next Guest Needs No Introduction. Early on at Saturday Night Live, she pitched a skit featuring a joke about tampons. The majority-male writers naturally didn’t get it. In this instance, she was given a chance to explain and they found it funny, but how many times are great ideas bypassed? 

Patterns of investment – Investors look for patterns that predict success, and for a long time all success stories starred people who look like Bill Gates and Mark Zuckerberg. Generally speaking, we have an unconscious bias towards white men as qualified and competent. It’s not surprising that this pattern continues, even with more female-founded companies coming to market.  

“The liberal pass” – Our CEO David Ehrenberg has an interesting theory about how the established startup scene has essentially “turned the other cheek” to give themselves a pass on this social issue. Tech and startup communities thrive in liberal cities in liberal states, and investors perceive that innovation and progress go hand in hand. David theorizes that many individuals don’t see themselves as misogynistic or sexist. He explains, “They voted for Hilary and treat women with respect. It’s not their fault!” This leads to not recognizing the role they could play if they accepted their role as part of the gender-gap solution.  

Doing more with less: “Women just get it done.” – Kirstin Mahoney, EGFS 

Our Director of Account Management, Kirsten Mahoney, speaks of clients who are frustrated. Regardless of gender, Kirsten says Early Growth Financial Services clients face the same issues: trying to get funding, lack of understanding of accounting, and failure to fully understand the value of accounting.  

Women made up 40% of new entrepreneurs in the United States in 2017 — the highest percentage since 1996.  

We’ve worked with over 2,000 companies, and while we now have more female-founded clients than ever, there is still a clear disparity that needs to be addressed.  

What’s the solution?  

Women need to succeed, creating a pattern of success that looks more diverse. While the statistics make that seem daunting, there are already several success stories and many companies focusing on lifting up women – like our partners, The Monarq Incubator, based in New York.  

Coming from “the belly of the beast” (Wall Street), co-founders Irene Ryabaya and Diana Murakhovskaya are very familiar with the issue at hand, but they didn’t expect it to be as bad in the startup world.  

The sexism wasn’t any better than on oil trading floors. It was actually worse.” -Irene Ryabaya, Co-founder of The Monarq Incubator  

There are many diversity and inclusion efforts paving the way to change this reality, and the obvious answer to fixing the gender gap is to invest more in more women.  

Our CEO David says another key to change is including men in the efforts to uplift women. Nearly one-third of Monarq’s listed mentors are men, and although all of the participating companies are female-founded, there are several men in the program. The Monarq founders were explicit that they never want to build something that’s women-only. 

Shifting societal norms are also a factor in change. Men are helping create a more gender-balanced landscape in their roles as life partners, seeing their female spouses as financial partners and being secure in the relationship and as themselves regardless of which spouse makes more money. 

Monarq’s program only accepts up to 16 companies per cohort. There’s plenty of room for more incubators and accelerators to adopt this model! They advise investors to be intentional and set goals for meeting with female founders. They ask investors to challenge their own personal biases.  

Equality is the right thing to do, there’s a business case for investing in women, and Irene from Monarq argues there are broader implications to consider if we don’t invest more diversely. As artificial intelligence becomes more embedded into our lives, we are already detecting racial and sexual bias in programs due to the biases of the humans building them. Imagine a future where the intellectual and innovative gifts of not only women, but diverse races and other minorities are fully included. Let’s find out what that would look like.  

Other organizations in this space: 


Questions or Comments? Reach out to EGFS

Follow Us: @EarlyGrowthFS

Related Posts:

What is Frontier Tech?

Impact Investing: On Capital Gains through Social Good

Examining Trump’s Effect on Immigration in Silicon Valley Recap

chatCONTACT US today for a free consultation to discuss the financial pain points of your business.