[KNOWLEDGE] The Gender Gap in Startup Funding
In a recently-published academic journal titled “We Ask Men to Win & Women Not to Lose: Closing the Gender Gap in Startup Funding”, Dana Kanze (Columbia University), Laura Huang (University of Pennsylvania), Mark A. Conley (Columbia University), and E. Tory Higgins (Columbia University) examine the underlying mechanism of startup funding disparity between the two genders.
Here are some key takeaways:
Almost 40% of privately-held companies are women-led, but only 2% receive venture funding.
- In 2016, VC invested in more than USD 58 billion in enterprises with all-male founders, compared to only USD 1.48 billion received by women. (source)
- The discrepancy is due both to the number of deals and the average ticket size.
Was it due to the lack of female venture capitalists?
- No; the number of female venture capitalists actually increased over the past few years, albeit the number is paltry compared to their counterparts.
The researchers explored an ingenious method to seek the answer to the funding gap.
- Tracking and comparing startups with similar characteristics (i.e. quality and capital needs), they find that male-led startups raised 5x more funding than the female-led ones in the samples.
- They then analyzed the Q&A sessions between 140 venture capitalists (of which 40% are female) and 189 entrepreneurs (12% female).