It’s worse than you think: By now, most businesspeople know that women-led companies have raised less than 3% of U.S. venture capital dollars, a number that has remained stubbornly fixed even as the number of firms and the total dollars invested has grown in recent years. For women running “hard” tech companies (I’ll define what I mean in a moment), it’s an even tinier fraction.
Recently, more resources have been dedicated to advancing the path for women in the workforce. For example, earlier this month, Melinda Gates committed to investing $1 billion to improve women’s power and influence in the United States. While these initiatives are noble, we have a long way to go, particularly when it comes to VCs investing in women-led deep tech businesses and women in STEM.
Despite those paltry numbers, this is not to say that female-founded and led companies can’t achieve success. Billion-dollar organizations led by women (like Rent the Runway and Glossier, two women-founded companies that are valued at more than a $1 billion,) have received funding and thrived. But there is a pattern of evident bias around which types of women-led businesses investors are more likely to buy into. Investors can picture a woman running a company focused on beauty, fashion, wellness, or maternity but few can picture a woman leading a technology company.
I am cofounder of goTenna, a wireless technology company that has built three generations of hardware, software, and networking protocols. Our tech is fully commercialized (and patented), we have multimillion-dollar contracts from the Departments of Defense and Homeland Security, and we can boast real-world after-action-reports detailing how our technology saves lives. The company is the definition of “hard tech,” which Silicon Valley uses as shorthand for companies that go beyond software or app-based solutions and try to address more complex technology challenges. Chip makers, some B2B tech companies, and goTenna fall under this category.
Yet over the course of raising four venture rounds, my credibility has been questioned over and over again. My gender, coupled with not having an engineering background, distracted VCs from the potential of goTenna’s technology and the success goTenna’s achieved so far.
During our Series C fundraise, I started to wonder whether my experiences—which have escalated from frustrating to unacceptable—are unique. I reached out to Crunchbase to see if they’d pull data to test my hypothesis: that female-led, deep tech businesses are significantly underfunded, even more so than traditionally underfunded female-led businesses.
We crunched the data and found it proved my hypothesis. Only $10B, or 2.6%, of $383B total venture dollars invested between 2014 and 2019, has gone to female-only led teams, even though they represent 4.92% of venture-backed companies. That is 44% less than they might have received if VCs were doling out cash on a proportional basis. But perhaps most appalling is that the women founders who are most impacted are those in non-female focused business categories. We raised 54% less than our fair share of VC funding, while women in female business categories raised 110 cents to the dollar.
“Female” business categories (for the purposes of this analysis, defined as companies on Crunchbase listed under Lingerie, Shoes, Fashion, Wedding, Beauty, Cosmetics, Flowers, Jewelry, Wellness, Child Care, Fertility, and Home Decor) represent about 21% of all businesses getting venture funding, and venture capitalists are rather equitably investing 22.39% of overall capital in female-only led startups in these sectors. And about 69% of female-led, venture backed businesses—think Lola, Outdoor Voices, Kendra Scott—fall into this bucket of companies, which tend to be consumer facing.
But the remaining 31% of female-led companies—those that that operate non-female-focused businesses—represent 4.1% of all venture-backed companies but receive only 1.88% of venture dollars. That’s just 46 cents for every dollar invested in female-focused businesses, or 54% less than they should receive on a proportional basis.
When it comes to female-led startups that operate “non-female”-focused businesses with a hard technology product, the problem is even more dire given that many of these technologies actually require more investment than consumer or software-driven companies.
- Female-only led teams represent 1.2 percent of wireless companies but get 0.3 percent of venture capital.
- Female-only led teams comprise 1.8 percent of all robotics companies but get 1 percent of all capital.
- Female-only led teams make up 2.8 percent of all artificial intelligence companies but get 1.5 percent of all capital, or 53 cents on the dollar.
From my experience, there are at least three driving factors that have led to this bias against women founders in tech.
Lack of precedence: We’ve all heard the saying that best predictor of future behavior is past behavior. This reliance on precedence harms female-led tech companies in the realm of VC funding. Investors may be able to support female founders running a “female-focused” brand because of predecessors like Estée Lauder and Helena Rubenstein who led the way and established themselves as industry moguls. More modern examples include Diane von Furtstenberg and Tory Burch.
For women who run technology companies, however, notable success stories don’t come to mind as quickly. This has caused a disconnect in funding, one that needs to be fixed. Just because women haven’t always been the stereotypical figures in leading technology companies does not make them unqualified.
Lack of visibility: Part of addressing this problem is doing a better job elevating success stories of women who have built leading technology companies. There are those leading technology development in AI, IoT, agri-tech, infrastructure, and robotics, creating new and better tools for mass benefit and making advancements in creating technology we might not otherwise have. We need to give these women in deep tech more visibility, at universities, in big companies, and at conferences.
By increasing female deep tech founders’ visibility, we can separate historical stereotypes from present qualifications and debunk the idea that women are less qualified to build or lead hard tech companies. This will pave the way for future women founders and CEOs to build leading companies and gain access to the funding revolutionary technology companies ultimately require to succeed and scale.
Lack of contact: Investors in enterprise and hard tech, many of whom are themselves technologists, have had scant contact with women in positions of power: the top engineering and CS professors are largely men, and the CEOs of the biggest enterprise and deep tech companies are men.
The solution process starts similar to any other problem: by first acknowledging that there is one. There are still those who believe these biases don’t exist. If you ask VCs, they’ll say they’d love to see more funding go to women, but the number of female-led tech companies doesn’t match those aspirations (as the data above clearly shows otherwise).
Additionally, venture investors should reconsider the metrics they use to evaluate the companies in which they invest. Lack of precedence does not always equal lack of potential. Instead of focusing solely on “gut feel,” driven by pattern recognition or perception of the founder or CEO, VCs should focus on hard, unassailable metrics like performance, growth over time, intellectual property, and business results.
Investors need to start matching their actions to their words. If venture capitalists want to close the gender gap in funding, they need to not only invest in more women-led companies overall but invest more money when they do. The problem will persist until investors can look at a woman without bias and see their potential objectively as a qualified leader. There’s this rallying cry that for young women, they can’t be it if they can’t see it. But for investors, it’s almost like they can’t believe it if they can’t see it. Let’s help them see it.
Daniela Perdomo is cofounder and CEO of goTenna, a leading mesh networking platform.