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The Case for Funding More Women-Founded Businesses

Coral Movasseli

Managing Director, Girls in Tech Dublin

In aggregate, we are making progress towards narrowing the VC funding gap for female founders. In 2011, just 11 percent of funding went to firms with at least one female founder; by 2018, this figure had grown to 21 percent. While this may be a cause for celebration, I advise we proceed with caution. 

Funding gaps

We’ve found ourselves between a rock and a hard place. We raised awareness and enthusiasm over the decade to solve the gender divide in equity funding, but we’ve also created a new disparity amongst women. Female startups in the UK and Ireland receive less than 1 percent of funding, while in the United States that figure is 2.8 percent. We are not equals. This campaign was to support all women, not just some. We can do better to bring everyone on this journey with us.

What happened that is we panicked at first sight of this problem and instead of looking to bolster the collective good, we lacked direction in our aims. We need a paradigm shift to move away from the current check-box exercise. Whenever we make diversity and inclusion our mission, we must also make equality our vision. Equality considers that funding distribution for women needs to be pragmatic – to reach women of different geographical, socioeconomic, and ethnic backgrounds.

Return on investment

The most pervasive argument for supporting women in business contends it’s a good investment. Female-run businesses, once funded, hit the same KPIs as companies founded by men, if not better.

They are just as likely to secure a second and third round of funding; and IPO faster – 3.8 percent for women, and 3.7 percent for men. Clearly, the problems are acute in the early stages when VCs – mostly men from a banking background – need to make a value judgement on whom to back.

This is exacerbated by the fact that VCs, like most flawed human beings, tend to have an affinity for what and who they know. There is a longer track record of successful male founders, and female-run businesses are typically not in financial services or energy, products VCs understand better based on their background. We need more female VCs to sit at the decision table.

But it’s not up entirely up to investors to fix these deep issues. It’s on all of us to promote equality. Whether we are VCs, MNCs, or individuals, we are all contributors to and receivers of societal progression. No person is an island.  

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