It's not news that Silicon Valley has a diversity problem. A cascade of data from some of the nation's biggest tech companies this summer confirmed that the industry remains stubbornly white and male. And that lack of gender diversity encompasses not just engineering departments and founders, but venture capitalists as well.
A Bad Baseline
Take the underrepresentation of women among tech entrepreneurs together with an overwhelmingly male VC population (with their presumably dude-heavy networks and natural affinity for the types of companies that speak to men) and the result has been dismal amounts of investor dollars going to female founders--less than five percent just a decade ago. This stubborn problem has remained for years despite more women joining the ranks of investors and increased awareness of the blatant sexism and sexual harassment female founders sometimes face when raising money.
"Investors may have a hard time understanding the pain point a female-focused company is trying to solve because they haven't experienced it firsthand. As a result, they may mistakenly perceive it as a niche market," 500 Startups Christine Tsai told Inc.com just a few months ago. "I've seen female founders face more challenges raising money vs. male founders, regardless of the business," she added.
But Reasons for Optimism
But among all the discussion of the remaining challenges for female founders looking to secure VC backing, there are a few bright spots that provide some reason for optimism, the Financial Times recently noted. Speaking to a variety of women about their experiences raising money, Sarah Mishkin also reported some more cheerful numbers. "Fourteen percent of venture capital investments this year in the US have gone to companies founded or co-founded by a woman," she notes.
Ecommerce, apparently, is a particularly strong niche for female founders looking to get funded. "The figure for ecommerce start-ups is higher and rising quickly, according to PitchBook, a VC and private equity research firm. Among ecommerce companies, nearly 40 percent of the start-ups winning venture capital backing were founded or co-founded by women, according to PitchBook. That is up from below 20 percent in 2009."
The niche remains challenging for everyone (just ten percent of retail purchases in the US happen online), which leaves plenty of room for growth, an attractive quality for investors. Plus, parts of the ecommerce space seem to be particularly popular among female founders. "Among the more stubborn categories are women's beauty and fashion, areas where many new female founders have chosen to focus," Mishkin points out.
These figures and the personal success stories from female founders in the FT piece may be encouraging, but Mishkin cautions against too much cheerfulness. "Although investment in companies set up by women has increased, raising funds from mostly male investors, particularly for brands aimed mainly at female consumers, has its frustrations," she concludes.
How optimistic are you that female founders will soon take home more of the funding pie?