Full access to Entrepreneur for $5
Subscribe

Closing the Gender Gap in Funding

Women invest more wisely than men but receive far less venture capital.

By
Opinions expressed by Entrepreneur contributors are their own.

Between 2004 and 2016, the number of angel investors in the U.S. grew from roughly 225,000 to 300,000. In the beginning only about 5% were female, but by the tail-end of this 12-year-trend their number had grown to 26% of all US-based funders.

Despite this increase, rookie companies led by women continue to receive much less money than their male counterparts. For instance, female-led startups only received 2.3% of all venture capital funding in 2020. This is made more disparaging considering that said companies tend to be, on average, more profitable.

Related: Why Women Entrepreneurs Have A Harder Time Finding Funding

Why female funders do it better

Investment data shows that women-helmed companies have higher business metrics than those run by men. One analysis performed by Boston Consulting Group found that, when female-led startups are able to receive funding, they end up delivering value at more than double the investment. While this provides inherent value for investors looking to maximize their ROI, it also presents an unseen opportunity: lady bosses hire more than twice as many females as their Y-chromosomed rivals.

Evidence shows that female leaders lean towards hiring more diverse teams, overall, which provides socio-economic dividends and  it paves the way for them to achieve similar levels of success. They are able to take note of how other women were able to found thriving ventures. 

Related: Women Invest Differently Than Men and Get Better Results

Juggling family with work

Millions of women entrepreneurs also are mothers. Raising kids and being a business leader forces you to become hyper-effective with time management. In remaining genuinely transparent with our families, team members and clients we can get buy-ins from all the stakeholders in our lives to encourage more effective multitasking. This will serve to provide an opportunity for women to gain even greater social ROI for their businesses as well as for cultivating their professional relationships.

Related: 9 Investing Books Entrepreneurs Need to Read in 2021

PE needs more estrogen

As of 2019, firms within the private equity industry held nearly $4 trillion in assets, yet the field is still underrepresented at the most senior levels of leadership. In fact, one analysis conducted by McKinsey and LeanIn.org found that women make up less than 20% of C-Suite teams in the PE industry overall, despite finding that “companies in the top quartile for gender diversity were 25% more likely to outperform industry-median EBIT growth than bottom-quartile companies.”

All too often, female leaders have found themselves to be the only "she" in C-Suite meetings. This adds further credence to the issues of gender inequality in the boardrooms.

In light of these gender-centric challenges, it is vital that we ensure boards of directors come to understand just how important it is for female-run enterprises to be taken seriously as it just makes good business sense to do so.

Raj Girn

Written By

Entrepreneur Leadership Network Contributor

Raj Girn is an award-winning serial entrepreneur and multimedia personality, who has worked with Fortune 500 companies and A-list celebrities for almost two decades.