As someone who is borderline obsessed with the importance of women’s entrepreneurship, I was truly blessed to spend the majority of International Women’s Day with some amazing women entrepreneurs at an event showcasing their businesses.
I spoke to so many women who are on the path to creating some amazing businesses. By far my favourite part was wheedling out secret business ideas… not from the people showcasing, but from other lovely women attending. As is almost always my experience, many women I spoke to offered mild protestations, claiming not to have a business idea. With a bit more chat, however, I uncovered the bit I love most. Almost without exception each woman adopted the behaviour of someone confessing a deep dark secret and whispered their ideas to me. Every single idea which came to light was interesting, clever, well thought out, and had real potential.
What stops women investing in themselves?
Then came my next question: what’s stopping you? In the end, the answers boiled down to a lack of 3 major resources- time, money and (far and away the largest culprit), self-belief. Inspired by this, I thought it would be an interesting exercise to explore each of these factors in more detail, and then think more about how to overcome them.
Time
Every new founder trying to start a business and do whatever it takes to “keep the lights on” must strike a balance between spending time earning money to live, and spending time developing the business. Is it really any worse for women? Well, yes, it is, and it’s all because of the “second shift”- i.e. the disproportionate burden of mental and practical family responsibilities borne by women (1). Women globally, regardless of their employment status, undertake the majority of household tasks and caregiving duties, spending roughly three times as many hours on unpaid domestic and care work as men do. Then there’s the mental load; all those hours spent organizing, remembering, and planning household work further exacerbates time poverty for women. This significantly limits our ability to invest in ourselves through education, work, following passions, self-care, and of course, starting businesses (2).
Money/funding
Beyond the time cost associated with needing to work another job or on other projects to financially cover the cost of living, capital investment is also required to start and grow the business. As laid out in a recent excellent article by Henadi Al-Saleh, companies founded solely by women received only 2% of all VC investment in 2022, and only about 15% of all VC 'cheque-writers' are women (3). Some of the most interesting statistics are from an (admitedly 10 year old) study which explored the effects of gender on entrepreneurial persuasiveness in the real world and in controlled experiments. In real world pitch competitions, male entrepreneurs were 60% more likely to be awarded funding for their pitches than female entrepreneurs. Even more interestingly, in the controlled study, where men and women presented identical pitches, 68.3% of participants chose to fund the ventures pitched by a man, while only 31.7% of participants chose to fund the exact same ventures when pitched by a woman. When asked to rate the pitches, the (still content-identical) pitches delivered by men were deemed to be more persuasive, fact-based and logical (4).
Just to make things more interesting, there isn’t just a bias in how women founders are perceived, there is also a disparity in the types of questions women are asked during pitches to venture capitalists. Another striking bit of field research, during a large pitch competition involving 180 entrepreneurs and 140 VCs, showed that men frequently received questions which focused on the potential for growth and gains, whereas women were more often asked questions which concentrated on the risks and how to avoid losses (5). Unsurprisingly, when considering the responses which positive, growth focused, questions elicit versus those which are aimed at mitigating negative outcomes, entrepreneurs who answered positive questions raised at least six times more funding compared to those who were questioned about risk mitigation.
Even outside VC, women’s access to affordable financing is also more limited. Not only are women less likely to apply for a loan in the first place, even when they do, women entrepreneurs’ business loan applications tend to be rejected more than their male counterparts. Those who do get approved are required to pay higher interest rates (6). Given all this, is it any wonder that women make up such a tiny proportion of the funded business founders club? In a nutshell, getting early-stage funding for anyone can feel like battling a prevailing wind, but when we are largely pitching to men in the business funding world, men are pushing against a steady gale, wheras women are having to fight a hurricane.
Self-belief
When Michelle Obama regularly experiences imposter syndrome, what chance do the rest of us have? I personally spent well over a decade helping other founders launch businesses, including many women, before it even occurred to me that I had the skills to do it myself. This kind of pervasive lack of self-belief among women entrepreneurs significantly hampers our potential for success. Of course, a fear of failure is not just something that happens in women- it is still one of the biggest obstacles to the creation of all new startups, but it is especially an issue for women (6).
Entrepreneurial perceptions by gender and national income, GEM 2022
This extra dose of self-doubt not only limits women's willingness to embark on entrepreneurial ventures, but also affects our ability to seek funding, negotiate business deals, and expand. This confidence gap is a major reason why women entrepreneurs are less likely to apply for funding, and, when we do, why we tend to request smaller amounts.
The lack of time, funding and confidence which keeps the start-up ecosystem predominantly the preserve of men significantly affects diversity of thought and innovation. In the coming wave of AI, this inequity has the potential to cause much more serious issues than they have to date. Addressing these issues is crucial, not just for empowering women entrepreneurs and ensuring their equal participation in the global economy, but for everyone’s safety, survival and to give us all the best chance for a fairer, better future.
References
1. Hochschild, Arlie Russell, and Anne Machung. The Second Shift. Reissued ed., Penguin Books, 2012.
2. Daminger, A. (2019). The cognitive dimension of household labor. American Sociological Review, 84(4), 609-633.
4. Brooks, Alison Wood, et al. "Investors prefer entrepreneurial ventures pitched by attractive men." Proceedings of the National Academy of Sciences of the United States of America (PNAS) 111.12 (2014): 4427-31.
6. Malmström, M., Burkhard, B., Sirén, C. et al. A Meta-Analysis of the Impact of Entrepreneurs’ Gender on their Access to Bank Finance. J Bus Ethics (2023).
7. Global Entrepreneurship Monitor (2022)
8. Leitch Claire, Welter Friederike, Henry Colette, Women entrepreneurs’ financing revisited: taking stock and looking forward. Venture Capital 2018, Vol. 20, No. 2, 103-114