By Shelly Kapoor Collins
The under-representation of women in Tech isn’t just a women’s issue. Diversity matters to the overall health of the Tech industry because it drives innovative solutions. In order to encourage the full participation of female founders and accelerate innovation through entrepreneurship, the Tech industry can’t operate under business as usual. Research shows that a workforce in which women are full participants and contributors to the economy helps better identify points of pain among potential customers and provide holistic solutions for everyone, not just a select few. Diversity in funding is critical to driving an inclusive Tech industry. It’s not just the right thing to do, the economic case supports it, and just as CEOs need to know their target customers, female startup founders need to have a clear path to raising capital and gaining access to markets. Research shows a correlation between the number of women on boards and higher corporate profits. Companies with more women board directors outperform by 66 percent in terms of return on invested capital, by 53 percent in terms of return on equity, and by 42 percent in terms of return on sales. Another study indicates that one-third of executives reported increased profits from their investments from employing women in emerging markets.
Male angel investors and VCs invest in other men because they tend to skew towards what they know, also sometimes referred to as the unconscious male bias. Thus, the advent and rise of female focused investment vehicles specifically for women led startups are key to removing barriers in order for women to obtain funding. By putting a process in place for female entrepreneurs so that they can compete above board, investor networks such as Golden Seeds, Astia and Springboard, and pitch competitions such as Women Startup Challenge, are critical as they provide a more structured and objective process to raising capital, eliminating the need to rely solely on a social connection converting into raised dollars. That’s not to say that one’s social network isn’t important. Tech startup founders, male or female, need to hustle and exhaust the power of their networks to raise capital. But, female founders need to hustle more and work harder at raising funding. According to the Harvard Business Review, women entrepreneurs only receive 4.2% of VC funding and last year a report issued by the Senate Committee on Small Business & Entrepreneurship on barriers to women’s entrepreneurship, found that women receive only 16 percent of conventional small business loans. This amounts to 4.4 percent of the total dollar value of all small business loans, leaving women-owned firms with only $1 out of every $23 that is being loaned to small businesses.
Call(s) to Action:
The National Women’s Council in the Small Business Administration, of which I am an appointed Council Member, released a critical report Access to Capital by High Growth Women-Owned Businesses, confirming the underfunding of women entrepreneurs and the need to support women so they can reach their potential. And, some players in the private sector are starting to step up to meet the challenge. Recently, Intel Capital launched the Intel Capital Diversity Fund, the largest of its kind at $125 million, to invest in businesses led by women and minorities and fuel economic growth. In speaking with Lisa Lambert, Managing Director of the Fund, Intel’s commitment to drive innovation through diversity and inclusion was evident and it’s clear that Intel Corporation is walking the talk.
But, private sector engagement is just one avenue for access to capital which can power women led startups. Pitch competitions, crowdfunding campaigns and female focused funds are other forces which are disrupting how women are raise capital to scale their businesses.
As part of my Access to Capital Series, I will be profiling each of these avenues and the woman behind the venture by which women founders can raise money for their startups, scale the company, generate jobs and boost our economy. By bringing visibility to these various means of funding, I hope that more women will become engaged in funding businesses for women by women. Because if we don’t do this for each other, who will?