Why the investment gender gap still exists

investment scale Dec 23, 2022

Starting a business is hard work. It requires a lot of time, energy, and resources, and one of the most important resources for any startup is funding. Unfortunately, it has been consistently shown that male founders are more likely to receive funding than female founders. This is a significant issue that has far-reaching consequences for the business world and for gender equality.

The Problem

There are numerous studies and statistics that demonstrate the funding gap between male and female founders. For example, a 2019 study by First Round Capital found that just 2.8% of their investments went to female-led startups. A 2018 report from Boston Consulting Group found that just 17% of startups with a female founder received venture capital funding, compared to 35% of startups with a male founder. In the MENA region in the summer of 2022, female founded businesses received only 0.1% of funding according to a report from WAMDA.

The funding gap has real-world consequences for female founders and their businesses. Without access to funding, it can be much more difficult for female-led startups to get off the ground and succeed. This can lead to a perpetuation of the status quo, with male-led startups continuing to dominate certain industries.

Potential Reasons for the Funding Gap

There are a number of potential reasons why male founders are more likely to receive funding than female founders. One reason is unconscious bias. Research has shown that investors are more likely to fund male-led startups, even when the pitches and business plans are otherwise similar. This bias can be difficult to overcome, and it may be contributing to the funding gap.

Another reason for the funding gap may be different networking opportunities. Men and women may have different networks and connections in the business world, which can impact their ability to secure funding.

Different pitching styles may also be a factor. Some research has suggested that male and female founders may have different approaches to pitching, and that these differences may impact the amount of funding they receive.

Finally, it is worth considering that men and women may be more likely to start businesses in different industries, which could affect the amount of funding they receive. For example, certain industries may be perceived as more "male" or "female," and this could impact the amount of funding that founders in those industries receive.

The Impact of the Funding Gap

The funding gap between male and female founders has significant consequences for female founders and their businesses. Without access to funding, it can be much more difficult for female-led startups to get off the ground and succeed. This can lead to a perpetuation of the status quo, with male-led startups continuing to dominate certain industries.

Changing the Narrative

So, what can be done to address the funding gap between male and female founders? There are a number of potential solutions that can help to level the playing field and provide more support for female entrepreneurs.

One solution is to promote diversity in the investing world. This can involve efforts to recruit and hire more diverse investors, as well as efforts to educate investors about unconscious bias and the importance of diversity. MINDSHIFT Capital is one of those investors - they're focused on post-seed early-stage companies in the U.S., Europe and Middle East. Through a global network, MINDSHIFT identifies companies with scalable technology, exceptional leadership and high growth potential. They invest with a gender lens, ensuring diversity of thought while narrowing the funding gap for female-led ventures. 

Another solution is to provide more resources and support for female entrepreneurs, like what we are working on at Female Fusion. Some studies indicate that women should be provided mentorship programmes, but our view is that what women really need is access to opportunities, networks and investors. At Female Fusion we are focusing on holding regular pitch competitions, networking events and summits to connect our incredible businesses with investors.

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