By now, we all know the numbers for women entrepreneurs and venture capital are dismal: Depending on whose research you prefer, only somewhere between 10 percent and 18 percent of VC money goes to teams that include a woman.
Now, a new report from Morgan Stanley unearths a new explanation for why those numbers are so low: Investors don't actually think there's a problem. The majority of investors believe women entrepreneurs, and entrepreneurs of color, are getting enough money already.
Morgan Stanley surveyed 269 professional investors, and found a large group -- 21 percent of equity investors and 14 percent of bank loan officers -- who said women are getting too much capital. An even larger percentage thought women are getting "the right amount" of capital: 58 percent of equity investors and 77 percent of bank loan officers.
For entrepreneurs of color, the sentiments are similar. Twenty percent of equity investors said businesses owned by minorities got more capital than they deserve, as did 13 percent of bank loan officers. Again, the largest group thought that minorities got "the right amount" of capital -- 56 percent of equity investors were of this opinion, as were 75 percent of bank loan officers.
Carla Harris, Morgan Stanley's vice chairman of global wealth management, and the founder of its Multicultural Innovation Lab startup accelerator, suggests that investors think women and minorities are getting enough money -- or even too much -- because these investors barely have contact with them. The reality is that at least some investors, who are mostly white and mostly male, just don't see that many women or minority founders, so when they do meet one, it comes as an aberration. Their response is to subject these women and minorities to far more scrutiny than a white male founder would receive. (And, since word gets around, these investors inadvertently discourage other women and minorities from approaching them in the future.)
"There is no way, given all the data, that [funders] should be thinking women and people of color are getting too much money," says Harris. "I really think it is because they are disconnected."
The survey itself revealed that investors are less likely to encounter entrepreneurs who are female or of color, than they are by white men. When asked how often they review women-led business opportunities, only 17 percent of investors and 24 percent of bank loan officers answered "very frequently." But 46 percent of investors and 69 percent of bank loan officers said they "very frequently" saw opportunities from men.
Similarly, only 18 percent of investors said they saw opportunities from minorities "very frequently," as did 24 percent of bank loan officers. Thirty-six percent of investors saw opportunities from whites "very frequently," as did 45 percent of bank loan officers.
While there is no guarantee that a woman will be more receptive to a pitch from another woman, a survey of 279 women entrepreneurs jointly conducted by Inc. and Fast Company found that 38 percent had specifically approached women as investors for their companies. Of those, 20 percent said they did so because they thought they'd be taken more seriously by a woman investor, and 28 percent said they thought a woman would better understand their target market.
Swatee Surve has been on the receiving end of the scrutiny Harris describes, many times. She is the founder and CEO of Bellevue, Washington-based Litesprite, a company that makes video games to help people manage chronic health conditions. She has multiple degrees, including a master's in biomechanics and an MBA. Her video game has won an award from the U.S. surgeon general and is the only such game currently recommended in clinics. Litesprite has won about $120,000 in awards.
But for many investors, she says, her company still seems too risky. When she first tried to raise money, she says, investors in her region wanted to see clinical validation of her games. Now that she has that validation, they want to see the risk cut even further. They say her company, just coming out of its beta testing, doesn't have enough revenue. "At a certain point, you just stop listening," she says. "You can't waste your time on people whose attitude is not going to change. Life is too precious for that."