Funding female founders has been a problem for a while. And it doesn’t look like it’s getting better. A recent report revealed that investments dropped 22% year-over-year in 2020. Over the past eight months, it’s down to just 2.2% of all venture funding, lower than it’s been in the past five years.
But there are those who are working diligently to close the gender gap in funding, and their strategies and successes were the highlight of a panel on “Accelerating Change: Closing the Gender Financing Gap,” at the Fast Company Innovation Festival.
Allie Burns, CEO of Village Capital, noted that the 2% figure stood in sharp contrast to the 46% of companies in their investment portfolio that are led by women. “We also are seeing a lot more diversity in terms of geography, race, ethnicity in our portfolio,” said Burns. She noted that companies that go through their accelerator program peer-review themselves to see who should receive investments. That process, she said, actually did mitigate gender bias.
Odunayo Eweniyi, cofounder and COO of PiggyVest, a digital savings platform based in Nigeria, took her startup through that accelerator program and agreed that it was a unique approach. “It becomes this kind of intimate thing where you’re asking questions about people’s businesses that you ordinarily wouldn’t ask your peers because you’re trying to evaluate them to see if you [would] put them at the top of your list,” Eweniyi explained.
But most accelerators don’t operate this way, and traditional ones can actually make the gender funding gap wider. Shruti Chandrasekhar, head of Startup Catalyst and SME Ventures at the International Finance Corporation/World Bank (IFC), pointed to their research that suggests male founders often come into such programs with more investment already, which puts them at an immediate advantage.
This is why, for her part, Eweniyi started writing investment checks to women-led startups or those that have diverse teams. “We call it ridiculously early,” said Eweniyi. “I will give them $25,000 to start, then build over the next 6 to 12 months.” She said she’s seen those startups go on to attract other funding. “But without that $25,000,” she maintained, “I would’ve never heard about those startups and probably the world also never would have helped.”
“What happens if investors are actually adhering to objective investment criteria?” posited Chandrasekhar. She believes that investors often have a set of aggressive investment criteria they use, “but talk a lot about going with their gut and how they feel about the person, et cetera.” She said their current research will examine what happens if objective criteria takes a more prominent role in the decision-making process.
But, Chandrasekhar noted, there’s no one solution. “It’s not that, all of a sudden, if I say I’m only going to invest in women, I, as an individual am solving the problem,” she said. “The whole market has to come together.”