Female founders don’t get enough funding. Here’s why.
By Pooja Narayanan, Junior Associate
In her blockbuster new book Brotopia, Emily Chang chronicles the “boys club” culture in Silicon Valley. Complete with alcohol and hard drugs, the most shocking revelation is the secret “sex parties” that are frequented by Silicon Valley elites. In a recent Vanity Fair article, Chang details the catch-22 that women in this situation face. On one hand, founders and VCs do business at these parties, so not attending ensures that you do not have a seat at the table. On the other hand, if you do attend, your reputation suffers and the doors of opportunity are shut in your face.
An anonymous venture capitalist notes that ‘“Some guys will whip out their phones and show off the trophy gallery of girls they’ve hooked up with. Maybe this is behavior that happened on Wall Street all the time, but in a way they owned it. These founders do this, but try not to own it. They talk about diversity on one side of their mouth, but on the other side they say all of this sh*t.”’ A classic case of hypocrisy.
This is only indicative of a larger problem.
The worlds of tech and venture capital, two worlds that are practically married to each other, have a big problem regarding gender equality. Women are paid less than their male counterparts, and often face discrimination and sexual harassment in the workplace. Not only do women account for only 25% of tech employees, but the gender gap in funding has gotten worse. VCs invested $58.2 billion in all-male founded companies in 2016, while women received just $1.46 billion.
One study even found that the questions founders get asked when looking for funding are fundamentally different. While male entrepreneurs are asked promotion questions, female entrepreneurs are usually asked prevention questions. For example, a male founder might be asked, “How would you monetize this?” while a female founder might be asked, “How long will it take for you to break even?” The study found that with each prevention question asked, founders lost an additional $3.8 million in funding. And 66% of questions posed to female entrepreneurs were prevention-oriented.
But these stereotypes about men and women in the VC world aren’t supported by performance data. According to Harvard Business Review, there are four stereotypes that affect how VCs evaluate investment opportunities. First, they assume that women are more cautious and risk-averse while men are not. Second, they believe that that women are reluctant to grow their businesses. Third, they feel that women do not have the resources to create high-growth companies. And fourth, they assume that women’s ventures underperform. All research did not indicate any statistical truth to these statements. Yet because of these stereotypes, female founders often find it harder to access funding for their startups.
These stories and studies were eye-opening for the Quake team. It made us more aware of the how we conduct ourselves in the workplace and the companies we accept into our accelerator. When we invest, we look for a great product or service, growing traction, and a solid leadership team while making a concerted effort to invest in companies with female and minority founders. In fact, 6 of the 13 companies in our current NYC accelerator cohort have at least one female founder, up from 5 out of the 16 companies in our last cohort. We also look to invest in ethnic and racial diversity, with 7 of the companies in our current cohort having at least one minority founder. This is only a step in the right direction, and we’re ready for the long journey ahead.
While the venture capital and tech industries have encountered major pitfalls in promoting diversity and equality, at Quake we are always making sure that women have a seat at the table. We do not discriminate against anyone, no matter race, gender, or creed. And we definitely don’t throw illicit sex parties. To succeed at Quake, all you need is passion and a willingness to take initiative. And maybe a laptop.
