The female founder funnel myth and what it means for investing in women

Yesterday, there were numerous articles written about the fact that a couple large VC funds missed their gender targets for new investments.

We do ask our VC funds for more transparency and effort, and then low key shame them when they don’t meet their goals and state it publicly, even if they are moving the needle by managing what gets measured.

Some will call this ‘accountability’, and that moving the needle isn’t enough. Some will mock their efforts. Some will be happy to see any iterative progress.

As a VC, I understand practically why measuring the funnel has merit, but it is insufficient. You can increase the diversity of outreach, set up blinded processes, measure how teams move through the funnel to make sure there arent inherent biases and all of that should be welcomed and encouraged.

But you can cut the numbers any way you like, and it won’t change the fact that before you even get close to a funnel, there are fewer women founding startups.

I don’t say this to excuse any apathy in trying to improve gender diversity in companies that get funded by investors.

I say this so we may actually start to confront the real challenge that, ignored will never solve the ‘who gets funded’ problem which is where most of the focus and media attention lies.

The data shows in Australia, the percentage of women startup founders is around 22%. This stat may flex up or down a little year on year but it sits around this space and is higher than the global average of about 15%.

In line with this, the percentage of startups with mixed founding teams are globally around 31%.

To me, this data suggests that the Blackbird data that was presented yesterday suggests they fund teams pretty closely to how they are represented in the ecosystem — with 35% of all new investments from Blackbird going to mixed gender teams (acknowledging this was a significant uplift from previous years and so maybe a positive blip).

As a VC, I can attest to the fact that there is only so much you can do to ensure you are seeing all the best opportunities. If the number of women founded teams (co-founded or female founded) are not there at the foundation stage, the math just doesn’t math.

As a VC, I believe NONE of the following statements are true or responsible for this gender differentiation at the root of startup foundation are:

• women are less entrepreneurial
• women are less confident
• women don’t have great business ideas

As a woman, here are some of the reasons I think there are differences in the number of women founding startups:

• women shouldering the majority of child bearing and caring responsibilities and the impost this places on financial security and superannuation disadvantage means founding a startup is a much riskier proposition for women than men
• women bearing the majority of elder care responsibilities and this impacts the time availability to devote to a startup which demands more time of its founders than a regular job does.
• women still not experiencing equality in the split of domestic duties — undertaking the lions share of domestic labour in the home which translates to less bandwidth for entrepreneurial activity.

And while some of you may say, “well none of those things matter if you are a 25-year-old graduate who want to build something of note when you have few of the above responsibilities”. Sure, except STEM sectors are seeing an attrition of women from the industry from almost immediately post graduation due to the perceived hostility towards women in the sector as our recent Diversity in STEM analysis showed.

Ahahh, you might say, ‘but startups don’t have to be STEM-focussed!’.

And that is true, but often these types of businesses aren’t captured in the data that relates to startups, and regardless, starting your own business relies on access to capital. Hard to do when you are 25, don’t have any money, perhaps recently graduated with a substantial HECS debt, unless you are quite privileged.

And if your business doesnt have a technology focus your options for finance are significantly reduced (not likely to meet a VC mandate for example, can’t access debt unless you are scaling revenue or profitable).

The point I’m trying to make here is that actually we need to challenge and unravel some of the systemic issues that are actually preventing more women from starting businesses in the first place and in the areas that are most attractive to VC — through more equitable approaches to shared responsibilities for some of the things that have the largest impact on time like domestic labour, and caring for children and elders, and stamping out hostile behaviour that discourages women from participating in sectors that matter to our economic future.

We can (and should) hold our funding levers accountable to ensure there is equity in access to instruments like venture capital, but doing so in isolation is like playing the violin on the Titanic.

• Elaine Stead is the founder and MD of Human VC. She writes on Medium here