While financial leaders are being encouraged by regulators and a range of stakeholders to make workforce diversity a top priority, female company founders don’t yet appear to be benefiting from that push when it comes to startup financing.
Company founders who are women secured just 2% of venture capital in the U.S. in 2021, according to research from Pitchbook. But CFOs and other financial executives can consider a range of creative strategies and tactics — such as lowering the minimum check size for investors — to foster diversity and begin closing the funding gender gap.
Addressing the roadblocks faced by female leaders requires supportive efforts from across the startup and funding ecosystem at various stages, a panel of industry leaders said at the FinovateFall conference in New York Wednesday.
Among the highlights:
Consider a company’s ownership structure as an entry point. Yassamin Issapour, chief financial officer and chief operating officer at Agora Digital Markets, said the company designed its capitalization table to allow for a broader support base.
“Being able to be intentional about our cap table, who we’re raising funding from, has been very helpful,” she said. The company, which has more than 40 shareholders, has “lowered the check size” to create openings for a more diverse set of funders, including women.
Support founders early. Mariquit Corcoran, head of fintech advisory and venture capital coverage at Independence Point Advisors, suggested a focus on funding for founders at the earliest stages could help nurture a pipeline. The emphasis should also be on helping founders build their networks, a key roadblock to securing future funding, she noted.
“It’s capital but it's also the connections and being able to meet the right people [and] talk to the right people,” she said. “That seems to be even more lacking than getting the actual capital itself.”
Build a network of female-led funding vehicles. Women investors are twice as likely to support female founding teams and three times as likely to invest in female CEOs, said Nisha Desai, CEO and managing general partner at Andav Capital.
“I see that anecdotally in my day-to-day interaction with a lot of other women general partners,” she said. “You need to get women in the decision-making roles on investment teams.”
In setting up venture capital firms, however, panelists recognized that there can be barriers to entry for women. A 2019 survey from Axios found that 9.65% of decision-makers at U.S. venture capital firms were women.
Address structural impediments to advancement. The venture capital industry needs to address female talent flight, as a significant proportion of women leave the industry by age 35, said Meredith Altenhofen, vice president and head of business development at Fidel API.
“If you think about where people are in their career by 35, they likely haven't reached those leadership positions,” she said. Altenhofen said she loves the conversation around working toward getting more venture capitalists that are investing in diverse populations and that come from more diverse backgrounds. But that can’t happen, she said, without developing the new talent throughout their careers.
“We can't get there unless we start at the beginning of one's career and be actively engaged in sponsoring that at every critical stage,” Altenhofen said.