The X Factor Topic: Women entrepreneurs, EV funding
In today’s business climate, entrepreneurial activity is strong. It’s a great time to be an entrepreneur. More than ever, the people seizing entrepreneurial opportunities are women.42 But while it may be a great time to be an entrepreneur, do men and women face the same challenges and an equal playing field? Granted, there are a number of accomplished and noted female entrepreneurs, currently and historically.
Here are just a few you might have heard of: Weili Dai, co-founder of Marvell Technology Group, a company that makes semiconductors; Leslie Blodgett, founder of several beauty brands, including Bare Escentuals and Shiseido; Angie Hicks, creator of Angie’s List, a website that helps connect consumers with local service providers; Sara Blakely, creator of the SPANX line of shapewear; Debbi Fields, the female entrepreneur known for the popular nationwide brand, Mrs. Fields Cookies; Rashmi Sinha, creator of the online presentation tool SlideShare. But female entrepreneurs do face challenges that their male counterparts may not, especially when it comes to getting funding from venture capitalists.
Overcoming the CHALLENGES
One of the findings of the GEM study—the global entrepreneurship study we talked about earlier in the chapter—is the gender gap in confidence about the ability to start a company. Around 48 percent of men expressed concern, but some 62 percent of women expressed concern about their ability to start a company.43 The biggest disadvantage for women, however, comes from the pursuit of venture capital funding. Women get a tiny fraction of venture capital funds compared to men. Women have founded nearly 40 percent of all privately held companies but have received only about 3 percent of all venture capital funds.44 And new research points to a surprising reason. Male and female entrepreneurs get asked different questions by venture capitalists (VCs), and it affects how much funding they get. The researchers found that male founders are typically asked questions about how their companies will succeed. The women founders, however, were questioned about how they would avoid failure. And it’s not just male venture capitalists asking those kinds of questions.
Female investors were just as likely as their male counterparts to focus their questions to female entrepreneurs on preventing failure. The result . . . less money offered to the female founders. In fact, for every additional “avoiding failure” question asked of an entrepreneur, the startup received, on average, $3.8 million less. A shocking amount, and an amount that could mean success or failure.
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So what’s the solution? Well, as we said earlier, having more women venture capitalists does not appear to be working. But female entrepreneurs should prepare themselves to recognize questions that are about preventing failure and reframe their responses to benefit their startups. And, VCs themselves should pose a balance of promoting success and preventing failure questions to male and female founders alike.
Discussion Questions
7-19 According to the research cited in this case story, what challenges do female entrepreneurs face?
7-20 Funding is an important decision for entrepreneurs. How are women affected during the venture capital funding process? Why is this a problem for female entrepreneurs?
7-21 If you were a venture capitalist (male or female), what steps would you take to avoid asking biased questions that disadvantage female entrepreneurs?
7-22 Can you think of any other possible solutions to prevent this type of bias from taking place? Be creative as you think about this.
7-23 Pretend that you’re a venture capitalist. Write three questions that you would want to ask an entrepreneur seeking funding. Pair off with another class member and evaluate each other’s questions to see if there is any possible bias.
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