According to “The Diana Report – Women Entrepreneurs 2014: Bridging the Gender Gap in Venture Capital,” only 2.7% of all venture capital-funded companies have a woman CEO, and 15% of all venture capital-funded companies have one woman on the executive team. Following its release, the report, which highlighted the challenges that women face acquiring capital, garnered global media coverage, interest from policymakers and over 1 billion views.
On June 5, 2019, Babson College’s Center for Women’s Entrepreneurial Leadership convened more than 250 investors, accelerators, policymakers, researchers, founders and other disrupters dedicated to changing the landscape of financing women entrepreneurs.
Here is what people were talking about:
The Pipeline Issue
Today, only a fraction of venture capital funding goes to women-led companies and people of color. What is contributing to this funding gap? The driver of the issue may stem from the supply side of capital, where there is a lack of investor diversification. If the goal is to get more funding to women and people of color, then women and people of color need to be on the investor side funding entrepreneurs.
Barriers to Entry
Why don’t we see more women and people of color on the investor side? Some barriers that prevent them from investing include:
- Lack of Awareness: Many women are not familiar with angel investing. They don’t know other angels, and they don’t see deal flow.
- Need for Education: Angel investing is risky, and many investors must overcome the fear of making a big investment into something new that has a high risk of failing. Resources and tools that will help investors learn about angel investing are needed.
- Access to Investments: Many angel funds have high minimums and charge high fees, inhibiting individuals from getting into early-stage investing.
Rethinking the VC Model
The objective of many venture capital firms is to find unicorns. Instead of hunting unicorns, investors may want to look for zebras – high-growth companies that will make a return and help the ecosystem. Many entrepreneurs do not want to scale their business just to have to sell it. There is an opportunity for the industry to design funds and capital structures (for example, flex equity and royalty financing) that work for entrepreneurs while offering investors solid returns.
Tips for Pitching Success
- Lead Like You Know the Game: Be confident that you have a great idea that should be funded.
- Get Beyond “No” to “Yes”: You will get 99 “nos” before you get a “yes.” Keep going. Raising money is difficult.
- Lead with Your Story: Focus on pitching your story and sharing your vision for your company’s future. Be dramatic.
The industry will change when we have more examples of successful women-owned companies that catch the interest of venture capitalists. When investors see that they are missing opportunities by not investing in women, they will realize that they must change their networks to find and get in front of new entrepreneurs.
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