The first quarter in 2023 may have performed better than economists predicted, but for women founders, it was still a loss. According to PitchBook, companies with all women-founded teams raised a mere 2.1%, of the estimated $37 billion invested in US startups.
As a Vancouver-based woman founder, who raised a pre-seed round at this time, I remained optimistic that the proof of our impact was changing the funding imbalance, but as we enter 2024, I have to admit, I’m not so sure.
Despite the data that shows companies with gender diversity perform better, women are still at a disadvantage when it comes to getting funding. In Canada alone, women-founded start-ups with a valuation of more than $1B US have almost doubled since 2019. Yet, policy changes, dedicated funds and increased awareness around gender bias have only helped curb overt discrimination. The battle women face for trust and respect in pitch rooms continues in more subtle ways.
As we start the new year, I want to focus less on the obstacles women founders face in raising funds and more on the actions we can take to combat them. Here are three ways women founders can help overcome the biases they face when accessing capital.
Turn Prevention Questions Into Promotion
At a recent work retreat I had the privilege of sitting in on a talk by Dr. Laura Huang, a professor of management and organizational dynamics.
Through her research, Huang found when it comes to accessing capital, women founders are frequently asked “prevention” questions from potential investors — this line of questioning revolves around how a founder is going to prevent their company from losing. For example, women are frequently asked how they will keep costs level so an organization remains profitable or how they will maintain rates of customer acquisition.
While these seem like logical questions for any investor to ask, they differ from the “promotion” line of questioning male founders are typically asked such as, what new markets they are going to expand into or what approach they will take to M&A.
Research shows founders who focus on answering “promotion” questions go on to receive up to seven times more funding than those who engage in dialogue around “prevention.”
Knowing prevention questions are more likely to come our way, as women founders we can combat this bias by answering prevention questions head on, then pivoting to focus on the future growth opportunities of our companies.
Recognize Imposter Syndrome For What It Is
It’s no secret there are more examples of successful male founders. Years of women being excluded from the workforce or limited in the roles they could take on have led to less representation. However, this doesn’t mean women are less capable — quite the opposite. New research from the Leadership Circle shows female leaders show up more effectively than their male counterparts across every management and age level.
Of course, investors are trained to assess risk and make the best possible decision based on both the known and unknowns. Having more concrete examples of male founders may put women at a disadvantage, but that’s why it’s even more important for us to show up to a pitch with confidence.
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I meet so many competent women who are building remarkable businesses, yet the subtle biases we face can wear down our confidence. I’ve found, that just being aware that imposter syndrome is a natural response to the environments we face, often helps my self-talk and allows me to focus on commanding more authority when I go into a pitch.
Whether it’s creating a hype squad you can rely on, or diving deeper into the metrics and market data than any of your competitors, it’s critical women founders tap into a source of confidence before going into a pitch: it’s the only way investors can see past the representation barrier, believe in our capabilities and what we are building.
Focus On Opportunity Over Impact
Women-led businesses often are classified as an impact investment. As such, investors often wonder about the trade-off they are making. For instance, perhaps they’ll make less money, but feel good about the social impact their money is having. That’s where we need to change the narrative.
Yes, investing in women can help close the gender gap, but there’s often a great return. Research by the Kauffman Foundation showed that privately-held technology companies led by women are more capital efficient, achieve 35% higher ROI, and when venture-backed, 12% higher revenue than startups run by men.
Women can tap into different markets, lead, and build products in different ways than men and that’s a benefit. As women, we can focus on the double-sided advantage our businesses present to investors: not only can investors have a positive impact on society, but they can make a lot of money doing it.
Of course there are always exceptions. Not every investor will be biased and not every woman founder will be as successful as the next. But, it’s only when we become aware of the unique challenges women face when it comes to accessing capital, that we can support them in the critical role they play in the growth and success of our economy.
Yvette Wu is the co-founder and CEO of Yield Exchange, a leading investment marketplace for wholesale GICs based out of Vancouver, Canada.
