Bringing diversity and equity to venture capital funding
New data released by Crunchbase shows that only 2.2% of all venture funding went to female-founded startups in the first eight months of this year. For Black women, it was a minuscule 0.3%.
Deena Shakir, a partner at venture capital firm Lux Capital, told CBSN that although women entrepreneurs have made progress when it comes to raising money, "There is still so much work to be done."
"The vast majority of venture capital firms still do not have a single woman check writer at the table," Shakir said.
According to the nonprofit organization All Raise, which advocates for female founders and investors, 63% of U.S. venture capital firms do not have female partners, and just 14% of those who write the checks are women.
"At the end of the day, it's clear — and there's data from Kauffman Fellows as well as other organizations that can attest to this — that the more women and people of color that you have around the cap table or around the pitch table, the more diversity you'll see in your portfolio. Full stop," Shakir said. "There is no doubting that, and so that is one of the key drivers. But choosing to have one person to represent the diversity index around the table is not going to move the needle. It's more than that."
According to another VC firm, First Round Capital, their investments in female-founded companies performed 63% better than investments in all-male founding teams. Additionally, a 2019 report by PitchBook and All Raise noted that companies with women on founding teams were more likely to exit one year faster than male-only teams — which can be a key metric for success among investors and their returns.
Male and female questions
Shakir also referenced research published in the Harvard Business Review that showed bias in the questions that female and male founders were asked.
"Categorically, it was clear that the women entrepreneurs were asked questions that are called prevention questions. In other words, questions that were asked about risks of the business: How might this fail? What if so-and-so does something to compete with your business? Whereas the types of questions asked toward male entrepreneurs were asked about the potential for scale and the potential for promotion," Shakir said.
"So there are a number of subtle, sexist types of evaluating companies as well as microaggressions within the industry and from the industry towards entrepreneurs that will take a long time to be addressed," she added. "It's not going to be a simple solution."
More broadly, Shakir noted, "The more that we can see how women entrepreneurs can unlock economic recovery and jobs and new markets and innovations," the more she hopes to see female entrepreneurs creating unicorn companies (privately-held startups valued at over $1 billion) and making further strides in the years to come.