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Harvard Study Shows Why Women Don’t Get Funding

Both men and women are more likely to invest in men, contributing to only 7 percent of women receiving VC funds.

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BY Heather Wilde - 12 May 2017

PHOTO CREDIT: Getty Images

Did you know that out of the current crop of "Unicorn" companies, less than 10 have a woman on the founding team, and only a small percentage include any women in their advisory boards?

For every 23&Me, there are at least 15 other companies who contain a less diverse founding makeup.

While women entrepreneurs run 30 percent of all small businesses in the US, employ 7.9 million people and generate $1.4 trillion in sales they only receive 7 percent of venture capital funding and around 17 percent of small business loan funding.

Why is this?

According to a study led by Alison Wood Brooks of Harvard Business School, men and women are more likely to be influenced by a business pitch if it is delivered by a man -- even if the exact same words are spoken by a woman.

But that's if you get to the pitch in the first place -- and most women never even get a seat at the table.

Venture Capitalists have to filter through thousands of companies per single deal, and as John Doerr puts it: the "world's greatest entrepreneurs" are almost all "white, male, nerds who've dropped out of Harvard or Stanford. When I see that pattern coming in -- which was true of Google -- it was very easy to decide to invest."

Other people are trying to break that mold, but it's hard going. Brad Feld, founder of Incubator Techstars, estimates that women-led companies now make up around 10 percent of TechStars' portfolio, and that companies led by immigrants or minority entrepreneurs make up another 10 percent -- but of course they can only work with what teams choose to apply.

For many women-led companies, it can be discouraging, often disheartening. They're subjected to comments that their male counterparts would never receive. Many women choose to go it alone, add a man to their executive team, or simply give up entirely. (While raising the current round for my own company, I've definitely had a lot of eyebrow raise moments myself.)

So, what can be done?

Be Better Than Everyone Else

For every Facebook, there's a ton of Myspaces. In the world of Venture Capital, there are winners and losers, and you need to prove that you are a winning bet.

If you want someone to invest in you, confidence is key, and that starts with not accepting anything less than the best in your team, your product or anything you do.

Diversify, Diversify, Diversify

Many women are limited to female-only networks, which isn't helpful when women make up only 7 percent of the ranks of VC firms. In order to successfully raise funds, women founders will need to extend out to male advocates who will support and encourage them throughout the process.

Lean On Your Tribe

Women are already starting out the gate breaking the mold before anyone even starts to look at their product. The more people they have to lean on, the better it will be in the long run.

Studies show that companies started by co-founding teams are more successful than ones started by solopreneurs, so gather together and make it more likely to happen.

While these are my tips for today, my hope is in the future there won't be any difference between funding male and female-founded companies.