IWD 2024: The Tech Disparity: Why Female Founders Receive Less Venture Capital Funding

For entrepreneurs in Australia and all over the world, the challenge of securing venture capital funding can be arduous, especially for female founders. Despite remarkable strides toward gender equality in various domains, a stark reality persists: female entrepreneurs receive substantially less venture capital funding compared to their male counterparts.

A recent article in In the Black by Rachel Williamson reported that in the 2021 – 2022 Financial Year, there were A$10 billion dollars of venture investment in Australia, of which $8.5 billion went to start ups with male founders only, $1.4 billion to mixed founding teams and only $70 million to start-ups run by women only.   In the US, start-ups funded by the top VCs are nearly 90 per cent male.

Unveiling the factors behind this disparity is crucial for fostering a more inclusive and equitable startup ecosystem.
Here are the top five factors I have noticed. 

• Bias in Funding Allocation:

Gender bias, whether conscious or unconscious, continues to influence funding decisions. Academic studies have revealed pervasive stereotypes and biases that portray women as less capable or ambitious entrepreneurs. Consequently, female founders often face scepticism and are subjected to higher scrutiny, making it more challenging for them to secure funding.

• Limited Access to Networks:

Access to influential networks is paramount in the venture capital realm. However, women encounter barriers in accessing these networks, which are often male dominated. The lack of mentorship, networking opportunities, and connections to key players exacerbates the funding gap, hindering female entrepreneurs from gaining the visibility and support needed to attract investors.

• Underrepresentation in Venture Capital Firms:

The underrepresentation of women in venture capital firms contributes to the funding disparity. With predominantly male decision-makers, there is a notable absence of diverse perspectives in investment decisions. This lack of representation perpetuates biases and hampers efforts to address the unique challenges faced by female-led startups.

• Risk Perception:

Investors' perceptions of risk play a significant role in funding decisions. Research suggests that investors perceive ventures led by women as riskier investments, leading to lower funding allocations. Stereotypes portraying women as risk-averse or lacking in leadership qualities further exacerbate this perception, undermining the prospects of female-founded startups.

• Pitching Challenges:

Effective pitching is crucial for securing venture capital funding, yet female founders encounter distinct challenges in this aspect. Studies indicate that women are often interrupted more frequently, receive fewer follow-up questions, and face gender-specific inquiries during pitch presentations. These biases in communication dynamics impede the ability of female entrepreneurs to convey their business ideas convincingly.

Addressing the funding disparity faced by female founders requires concerted efforts from various stakeholders within the entrepreneurial ecosystem. Eliminating gender bias in funding decisions, enhancing access to networks and mentorship opportunities, promoting diversity within venture capital firms, and challenging stereotypes are essential steps toward fostering a more inclusive and equitable environment for all entrepreneurs. 

By recognising and mitigating the systemic barriers that hinder female founders, we can unleash the full potential of diverse entrepreneurial talent and drive innovation forward.