The Funding Gap: A Closer Look

According to a report by PitchBook, in 2019, companies founded solely by women garnered only 2.7% of the total capital invested in venture-backed startups in the United States. This figure is alarmingly low, considering that women constitute approximately half of the total population. Furthermore, a study by Boston Consulting Group (BCG) and MassChallenge, a global network of accelerators, found that businesses founded by women deliver higher revenue—more than twice as much per dollar invested—than those founded by men, making them better investments.

Despite these promising returns, the funding gap persists. The Harvard Business Review attributes this disparity to gender bias in the venture capital industry. Women entrepreneurs are often asked different questions by venture capitalists, which influences the amount of funding they receive. While men are often asked about the potential for gains, women are frequently questioned about the potential for losses.

Bridging the Funding Gap: What Needs to Be Done?

Addressing this funding gap requires a multi-faceted approach, involving changes in perception, policy, and practice. Here are some ways to make this happen:

1. Changing Perceptions: The first step towards bridging the funding gap is to change the perception of women entrepreneurs. This involves challenging and overcoming gender stereotypes that often influence investors' decisions. Investors need to recognize the potential and profitability of women-led startups and make investment decisions based on merit rather than gender.

2. Encouraging More Women to Become Investors: Having more women in investment roles can help bridge the funding gap. According to a study by the Kauffman Foundation, venture firms with women partners are more than twice as likely to invest in companies with a woman on the executive team. Therefore, encouraging more women to become investors can lead to more investments in women-led startups.

3. Providing Mentorship and Networking Opportunities: Women entrepreneurs often lack access to business networks and mentors, which are crucial for securing funding. Providing women with more opportunities to network and receive mentorship can help them build relationships with potential investors and gain valuable advice on securing funding.

4. Creating Women-Focused Funds: Another effective way to bridge the funding gap is to establish funds specifically for women entrepreneurs. These funds can provide the necessary capital for women-led startups and encourage more women to venture into entrepreneurship.

5. Implementing Policy Changes: Governments and regulatory bodies can play a significant role in bridging the funding gap. This can involve implementing policies that encourage gender diversity in venture capital firms, providing tax incentives for investing in women-led startups, and establishing funding programs specifically for women entrepreneurs.

While the funding gap for women entrepreneurs is a significant challenge, it is not insurmountable. By changing perceptions, encouraging more women to become investors, providing mentorship and networking opportunities, creating women-focused funds, and implementing policy changes, we can bridge this gap. Not only will this lead to more women-led startups, but it will also result in a more diverse, inclusive, and profitable entrepreneurial landscape.