Women-led businesses face sexism in the VC world
“The world is not fair, period,” says Shernaz Daver, CMO of Khosla Ventures. “And it’s doubly not fair, unfortunately, if you are a woman.”
In the last year, Daver has heard complaints from women founders who sought funding for their ventures.
“I went to fundraise and was not taken seriously because I was a sole woman founder until I found a male co-founder,” said one.
Another reported, “I went to get venture funding, and I was asked when I was going to have kids. No guy was ever asked that.”
One female founder said, “I was told I was too aggressive in my financial projections, yet when my male partner presented it, he was seen as confident.”
Daver has been in the industry for over 35 years. “I heard the same thing 35 years ago. So it’s kind of bad. And if you’re Black or Hispanic, it gets worse.”
Today, only 2% of VC dollars go to women founders. “It needs change.” says Daver, “Access to capital is key.”
Small businesses like female-led start-ups, don’t have the same access to capital, training, and support that male-led businesses get. Does racial identity or gender affect access? How does access to venture capital differ?
Growing Main Street America, one small business at a time
It matters, say experts at a July 14 EMS briefing, because small businesses are an essential part of the American economy. According to the U.S. Small Business Administration (SBA) there are over 33 million small businesses in the US that make up 99.9% of all businesses.Â
Small businesses employ almost half of the U.S. workforce and add 44% to the GDP. Significantly, immigrants have started up more than 18% of small businesses in the U.S.
During the pandemic, there was considerable fear about the potentially disproportionate effects that COVID-19 would have on small businesses. However, data from the White House shows that small business growth, supported by the American Rescue Plan (ARP), has proven resilient.
New census data shows the Biden-Harris small business boom continued in 2022, said Administrator Isabella Casillas Guzman, head of the SBA, with a rapid pace of new business applications second only to the record set in 2021. “Since the start of this administration, small business applications reached a high of 10.5 million, the most in any two years in our nation’s history.”
Changing the status quo
“Women are starting and building exceptional companies, and we don’t celebrate them,” says Daver. If you look at companies like Glossier Stitch Fix, Spanx, Bumble, 23andme, and Canva – they are multibillion-dollar companies started by women.
Women are exceptional leaders and founders who says Daver, need a government campaign that amplifies their achievements. “I think it would go a long way.”
Daver says that venture capital reflects most things in life that follow pattern recognition. “We marry people similar to ourselves, we associate with people similar to ourselves. And very often venture capitalists will invest in things that they understand. I would say if you have more women Venture Capital Partners, they would invest in more women-owned businesses; stats show that.”
The gamechangers
“A lot of women starting up companies today are actually coming out of biotech,” comments Daver, because more women are getting masters and PhDs in biology and genetic engineering. In the growing fields of maternal health, fertility, IVF, etc., companies that are funded will invariably have a woman-backed partner from the venture firm.
Women are also starting their own VC firms. That’s a game changer adds Daver, because once women are in positions of influence and decision-making, it changes the tide for lots of women.
The privilege to fail
At the briefing, Senator Mark Warner, D-Virginia acknowledged that his ‘white, male privilege’ gave him access to an Ivy League education, only $15,000 of student debt, and opportunities that allowed him to fail before succeeding as an entrepreneur.
Daver pointed out that women do not have that privilege. “If Senator Warner can fail three times being a white male, I do not know a single woman today that can say that.”
The fact remains that women get fewer dollars in funding than a male.
“We need to give women the permission to fail. We do not do that as a society, said Daver. “So unlike Senator Warner, she can’t experiment because she doesn’t have the ability to experiment. The truth is, there are very few companies in the world that start with a product, nail it, and become a big company. A perfect example is Slack. Slack started as a video game company – they created Slack to chat between themselves, but nobody remembers that.”
Daver called out the press in particular – for being hard on women who fail. “All of us beat them down brutally….the female gets killed and the male founder gets a pass on it. This also needs to change.”
Small businesses in the black community
The pandemic hit the black community harder than most. Forty-one percent of black-owned businesses closed in the spring of 2022, said Charles Phillips. He’s a co-founder of the Black Economic Alliance. Part of the challenge is the lack of access to capital and networks. A survey by McKinsey of over 2000 businesses found that most black families say, “They didn’t know anyone who could lend them $3,000 if they wanted to start a business.” Additionally, part of the challenge is always access to capital. As expected, Black men have slightly more access to capital than Black women, said Phillips.
The good news is that entrepreneurship is alive and well in the Black community. “Looking at the last five years, it has been growing about 34%, on average, said Phillips. “But they need more capital and training and access to these relationships.”
Community Development Financial Institutions
CDFIs that provide credit and financial services to underserved markets and populations are a way forward said Sen. Warner. He co-chairs the Senate Community Development Finance Caucus. Many black and brown entrepreneurs and minority-owned businesses are bootstrapped and don’t have a traditional banking relationship. CDFIs, by definition, can service them.
Making America small business friendly
Sen. Warner acknowledges that America has institutional racism that it needs to deal with. “At the end of the day, we get to be measured by what we actually get done.” He reiterates his theory is based on the principles of pure, old-fashioned capitalism.
Within his CDFI coalition of 10 Democrats and 10 Republicans Warner is able to find common ground. “I can find Republican partners who are so much more interested in access to capital issues than traditional anti-poverty programs.”
Daver is optimistic because she sees the momentum building in the right direction.
“I have to believe the world is changing. We will continue to change if we all do it as a community, private enterprise, public enterprise, venture capital women themselves, education. A large part of it is quite frankly, family and opportunity.”
Photo by Patrick Tomasso on Unsplash