More women are becoming VC-backed tech entrepreneurs every year, and that number is expected to grow in 2020.
That’s the conclusion of a recent PitchBook/All Raise report, Women in the VC Ecosystem, which notes that there were 2,700 female-founded, venture-capital-backed technology startups in 2018, compared with just 410 in 2009.
“Percentages aside, a tech ecosystem with female entrepreneurs in the thousands (instead of in the hundreds) bodes well for the industry going forward,” the report found.
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But while female-founded tech startups now make up nearly 20% of all VC-backed tech companies, they still bring in a lower percentage of all tech investment dollars — about 12% in 2019 to date, according to the report.
“Female founders are still struggling to capitalize their companies with the funding necessary to scale,” said Dr. Dana Kanze, an assistant professor of organizational behavior at the London Business School, who shared her expertise in the report. At the same time, “female founders are also less likely to be able to self-fund their startups while awaiting outside funding,” largely due to pay disparities and other systemic barriers that inhibit women from accumulating personal wealth.
As for why women may be getting less funding than men, Kanze noted that her research has found that male and female entrepreneurs are being asked different questions by investors based on their gender. Investors tend to ask men how they plan to make more money, whereas women are quizzed about how they will prevent losses. Women entrepreneurs “dig themselves a proverbial grave by answering investor questions as conscientiously as possible, all the while reinforcing their association with the unfavorable domain of losses,” she said.
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Having more female investors could help solve the problem, as women are two times more likely to invest in a firm when there is at least one female founder. Currently, that number is growing as the amount of female-controlled wealth is expected to hit $72 trillion by 2020.
There is also promise for women in technology as there has been a 84.7 percent increase in tech value for female-founded companies since 2014.
“The tech industry is uniquely cost-effective and scalable—two profoundly important ingredients for investors—and as software ‘eats the world’ sector by sector, it’s likely even more attention will be paid to the broader technology market,” said the report.
Interestingly, opportunities for women in technology are better outside of Silicon Valley, the report found. In the future, New York City and Los Angeles might be hotspots for women-owned startups. New York’s tech deals with women are comparable to Silicon Valley even though the economy in Silicon Valley is significantly larger. Female-led technology startups are one-third of the entire Los Angeles market. In general, Los Angeles is home to more women-owned tech startups than Silicon Valley.
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