Gender Gap in Start-Ups and Women’s Access to Financing

The issue of gender inequality in the tech industry has been making headlines over the past year. The most prominent technology companies – most notably Google, Apple, Yahoo, Facebook, Twitter – have released reports that disclose just how diverse their workforce is, detailing the percentage of men vs. women, as well as the ethnicity of their employees. The results? From a gender perspective, the employees of these companies are overwhelmingly male (about 70-80% on average).

New York Times writer Claire Cain Miller commented on these results: “There can be a sexist culture that turns away women, as evidenced by the high attrition rate among technical women as compared to men. And women who try to start tech companies face exclusion by a venture capital network dominated by a chummy fraternity of men.

We decided to turn our attention to this very issue, analyzing the gender gap in entrepreneurship and startups. We used as reference the AngelList database, a platform that lists over 650,000 profiles of entrepreneurs, startup professionals, venture capitalists and business angels – globally. Using the NamSor API we determined the likely gender of every person that belongs to AngelList.

Before you see our results, it is important to point out that as a source, AngelList has a bias towards North America and towards startups that aim for a global market. For example, 1700 investors in AngelList are looking to invest in Vancouver – a city which has a local business angels ecosystem with about 13,000 members. Earlier this year, researchers have started to explore this database to analyse which start-up characteristics are most important to investors in early-stage firms [Stanford, May 2014].

We have asked some angel investors and entrepreneurs to comment on those results.

Cassandra Kelly is Joint CEO of strategic and financial advisory firm, Pottinger, entrepreneur, international speaker, keen philanthropist and particularly passionate about human rights.

Cassandra Kelly:

When I look at the numbers they dont say “not enough women are trying to be entrepreneurs”, “women are not as capable as men” but what the numbers do suggest is that women are finding it more difficult to get the support of men and women for their ideas.

What has been your experience as an entrepreneur while approaching investors? Do you think gender plays a role in decisions to invest in a company?

Kelly Hoey is a strategist, startup advisor and angel investor based in New York City. She is the CMO of the startup Cuurio and in 2011, co-founded Women Innovate Mobile, a startup accelerator focused on investing in female-founded mobile ventures. 

Kelly Hoey:

I have been overwhelming supported in my activities in tech by investors who have become mentors, advisors and friends. And yes, they have committed to investing. My experience has been exceptional in that there is a lot of diversity in my circle of angel investors however, overwhelming the “get it done” support for me has come from men.

Dawn Barber is the co-founder of NY Tech Meetup, an influential platform for tech start-ups that has more than 40,000 members and that hosts a monthly event (invariably sold out) where members demo their ideas.

Dawn Barber:

Not as an entrepreneur, but I’ve been involved with the New York tech community for over 15 years now, having close ties to both our NYC entrepreneurs as well as our NYC venture capitalists and angels. While I don’t believe that most of the male investors, whom I know, consciously discriminate against investing in women founders (in fact many go out of their way to try to find more women to invest in) I do believe that it’s easier for them to invest in people they’re comfortable with, that they have experience with, they work with and socialize with – the majority of those people are white men. So this is more of a structural problem than a conscious one – it’s harder for women to break through this cycle. We must keep trying, though! That‘s why I became one of the first Pipeline Fellowship angels – i wanted to support this effort to attract more women to angel investing and teach them the ins & outs of becoming angel investors.

Do you think that the gender pay gap has an influence in the gender gap in angel investing? If so, how?

Kelly Hoey:

There may be a correlation in the sense that if it is more difficult for women to accumulate wealth through traditional employment channels, they may be more cautious to “gamble” it on highly risky alternative investments. A paradox, as those investments may generate the financial security a woman is looking for. And ironic, as women over 40 are the wealthiest generation in human history – in the U.S. women account for over 50% of stock ownership and control 60% of all personal wealth.

What can be done to improve these numbers, leading to more gender balance?

Dawn Barber:

Men and women have to work together at changing this and perhaps men have to, not just be conscious of the imbalance and have the desire to change it with us, but have to start getting outside of their comfort zones in investing. Perhaps a contribution to this structural problem is that there are not as many women becoming repeat entrepreneurs – the other side of the coin. If investors have experience with them, then they‘ll have an easier time getting funded the next time.

Kelly Hoey:

My feeling is change will really happen when successful female entrepreneurs call out investors with “you didn‘t get my IPO, because you‘re a sexist jerk.” Change will happen faster when it hits the wallet or the company bottom line.

Natalia Oberti Noguera, dubbed “The Coach” by Marie Claire, is the founder and CEO of Pipeline Fellowship, an angel investing bootcamp for women that is changing the face of angel investing and creating capital for women social entrepreneurs.

I have noticed a gendered preference for privacy when it comes to identifying as an angel investor on public platforms, such as AngelList. According to the Center for Venture Research, in 2013, only 19% of U.S. angel investors were women and only 4% were minorities. While the numbers are low, they‘re not zero. I encourage more women and people of color angel investors to increase their visibility as a way to inspire more diversity to join their ranks.

Stéphane Distinguin is the founder and CEO of FABERNOVEL GROUP, an international innovation agency with offices in Paris, San Francisco, Moscow, and Lisbon.

Stéphane Distinguin:

It took much too long for big corporations to understand the glass ceiling was unfair but also a limit to their own development. It is absurd to see startups, where youth and speed matter so much, are no exception. It is a matter of competitiveness and success, of strategic differentiation when you think of so many ecosystems trying to be the new Silicon Valley. I have been convinced for years now that the next Silicon Valley will be the place where women and all minorities will be as present as white men in our business and environment.

Marie-Caroline Lanfranchi is Partner at FABERNOVEL and Deputy General Manager at FABERNOVEL PARIS, in charge of Operations.

Marie-Caroline Lanfranchi:

As long as boards remain male dominated, we won‘t be able to change the system, or enter a fair and sustainable economy where everybody has the same chances. This is why we need gender equality in Tech and Investors Boards, not only in HR and Marketing. We need more models like Marissa Mayer, Sheryl Sandberg or Emma Watson. We take the opportunity to say it loud, now!

Cassandra Kelly:

I think we need to hold up successful examples of companies that women have built. It is easier to be something when you can see role models that have done it before that look like you. It is also easier to invest in businesses when you have case studies to show that women are a good investment – at least as good as men.

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About Gender Gap Grader

Gender Gap Grader’s mission is to measure the gender gap across all professional fields. We publish gender gap estimates at the finest grain level, using whatever reference database we can identify for a particular industry: The Internet Movie Database (IMDB) for the film industry, The Airman Database for pilots… and more to come.

We do our best to continuously improve the tools and methodology. That said, the precision of predicting gender from personal names varies per country/culture; moreover, the coverage of a ’reference database’ may not be 100% global (IMDB may not cover 100% of Indian films etc).

In the meantime, we encourage you, dear reader, to contribute to the wiki if you can find an alternative and reliable piece of statistics. You can do your own analysis too: we’ve disclosed the full data used in this study;  we’ve opened NamSor Gender Guesser API which extracts gender from names; and to make it usable by everyone, we’ve built an extension for RapidMiner, a leading open source data mining and predictive analytics software.

So you can run your own gender gap analysis, where and when it matters to you!

Elian Carsenat & Elena Rossini

©  2014

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