We Can Fix The Funding Gap: Here's How

Forbes

Forbes Contributor Shelley Zalis compiles advice from female founders and c-suite executives to outline how companies can fix the funding gap.

Transcript

00:00When we talk about achieving gender parity, we have to broaden our scope beyond the obvious

00:09gaps, like the pay gap, and consider a lesser known but equally important gap, the funding

00:16gap. Numbers don't lie. Currently, only 2% of all VC funding goes to women-led startups,

00:24despite the disproportionate impact that women have on driving wealth.

00:29Change begins with asking the right questions. Most importantly, how do we make equity equitable?

00:37For the answer, let's go straight to the source. Here's what I learned from powerhouse female

00:42funders and founders. First, know that there's power in the pack. I always say a woman alone

00:49has power. Collectively, we have impact. We know that when women are at the table, they're

00:55twice as likely to invest in women founders than their male counterparts. The truth is

01:00that channeling the power of the pack is how we'll change the equation and close the funding

01:05gap. This is where my dear friend Liz Heller, currently managing partner at Membrane, comes

01:10in. She tells me there simply isn't enough communication among women in wealth. The key

01:16is to create more opportunities where we feel safe to gather and share our knowledge, ideas,

01:22best practices, and resources. It's clear that the reason our algorithm is out of balance

01:28is because there's not enough women writing checks. Venture capital has historically been

01:34a male-dominated industry, with 95.5% of US VC firms reporting majority male decision makers.

01:42The question should not be, why is only 2% of VC funding going to female founders? The

01:49question should be, why are only 16% of decision makers at VC firms women? Ultimately, you

01:57need to bring a pack to break the pattern. Equality is a choice, and unconscious bias

02:05is just an excuse. If you use the word unconscious, you are conscious. Once aware, what are you

02:13going to do? VC firms need to hire and promote more diverse partners, period. That is how

02:20you solve the algorithm for equality. Secondly, women drive wealth. Another trailblazing friend

02:27of mine, Divya Gokulnath, co-founder and director of Byju's, an educational tech company and

02:34one of India's most successful female startup entrepreneurs, recently shared a concept with

02:40me that I am obsessed with. It's called the 20-60 rule. Essentially, women may represent

02:48only 20-30% of a room, but they make up 60% of the voice. As Divya says, we don't just

02:56want a seat at the table, we want to drive an agenda. This rule speaks directly to the

03:02mindset shift that needs to happen to tackle the funding gap. Rather than looking at the

03:07quantity of funding allocated to female founders, let's focus on how women are delivering on

03:12that money. The fact is, female-founded startups outperform their male counterparts, generating

03:1963% more value and twice as much per dollar invested. One study concluded that VCs could

03:27have made an additional $85 million over five years if they'd integrated a gender lens into

03:34their investment decisions. These are the types of numbers that should be making headlines.

03:40So let's make the invisible visible. When we shine a light on the dominant role that

03:44women play in driving wealth, the business case for adding the female factor into the

03:49equation becomes undeniable. We want strong financial returns, don't we? So what's the

03:56issue? Stop leaving money on the table by overlooking female founders. We also need

04:02to acknowledge that the pitch process is broken. According to Janet Kang, managing partner

04:09at MAC 49, female founders are at a disadvantage from the outset. If we want better VC outcomes

04:17and more gender balance in entrepreneurship, Janet argues the best place to start addressing

04:23inequalities is during the pitch process. In fact, the funding gap runs so deep that

04:29studies have actually found that VCs pose different types of questions to male versus

04:35female entrepreneurs. Whereas they tend to ask men questions about the potential for

04:41gains, they tend to ask women questions about the potential for losses. These nuances matter

04:48and the solution is twofold. Yes, VCs need to drive more balanced Q&A sessions, but Janet

04:55notes that in the meantime, women entrepreneurs can also practice flipping the script so they're

05:01prepared to answer certain questions in a more favorable light. For example, instead

05:05of responding to a question about how long it takes to take her to break even, Janet

05:10will talk about her monetization strategy and all the great milestones she's achieved.

05:16In the end, fixing the funding gap isn't about retrofitting the past. Let's work together

05:21to intentionally design a new, more inclusive VC model. Success boils down to creating a

05:27venture ecosystem where differences are viewed as strengths and everyone is welcome at the

05:32table. Once we achieve this, we will create a future where equity truly is equitable.

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