Tech startups have a gender problem. Despite more women than ever seeking to start their own companies, only one-in-three founders are female and the trend is not improving. At some point in December 2017, it will be illegal for tech startup CEOs anywhere in the United States to discriminate based on sex at an employment level under Title VII of the Civil Rights Act of 1964 (later amended by Congress).
Female founders are in short supply at enterprise tech startups. This is due to the fact that they have been underrepresented in the field for a long time, and many companies still don’t know what it takes to be successful with female entrepreneurs.
According to a recent survey, just around 2% of business software firms in the United States include at least one female founder.
One explanation for the low percentage of female entrepreneurs, according to experts, is that women have a tougher trouble obtaining early finance.
The 2% statistic is based on just 354 corporate software companies monitored by Work-Bench, a New York-based venture capital company that created the research. 154 of the businesses got investment in 2021.
The proportion was estimated using Work-database Bench’s of female-founded businesses and data from financial data firm PitchBook Data Inc., which reveals that there are around 18,500 venture capital-backed business-to-business software firms in the United States.
Women have long been underrepresented in the software industry’s technological sector. According to U.S. Department of Labor statistics from 2019, women make up 18.1 percent of all software engineers in the United States, and they earn 88.7% less than their male colleagues.
Experts believe things aren’t much simpler for women who branch out to create their own commercial software companies. Implicit prejudices, disparities in networking relationships, and a loop that keeps women mostly outside of venture capital make it difficult for female-led businesses to get off the ground, sustaining a severe gender imbalance in one of the country’s most male-dominated professions.
About being a woman in the corporate software market, Idit Levine, the founder and CEO of Solo.io, remarked, “Of course it’s affected me.”
Solo.io’s founder and CEO, Idit Levine
Solo.io (photo credit: Solo.io)
Ms. Levine developed Solo.io in 2017, which offers infrastructure software to assist manage application traffic using application programming interfaces, or APIs. The firm announced in October 2021 that it has secured $135 million in Series C investment at a $1 billion value. Despite this, Ms. Levine believes that during the six months she spent seeking for first financing, male founders were able to form ties with male investors that “obviously I couldn’t as a woman.”
April Koh, co-founder and CEO of Spring Health, a startup that uses assessment and machine-learning technology to help companies provide better mental health support for their employees, said, “VCs want to work with people they have great chemistry with, and sometimes that’s a euphemism for investing in people who are like you.”
According to a PitchBook analysis from 2021, women make up 15.4 percent of venture capital general partners in the United States. Part of the reason for this, according to Dana Kanze, an assistant professor of organizational behavior at the London Business School, is that venture investors are typically previous entrepreneurs, thus the less successful female founders there are, the fewer female venture capitalists there are.
“It has to do with these misperceptions that female founder CEOs are a ‘lack of fit’ with their enterprises when they cater to male-dominated businesses rather than female-dominated industries,” Dr. Kanze said.
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Investors ask male founders “promotion” questions that concentrate on things like the company’s potential accomplishment, while they ask female founders “prevention” questions that focus on the things that may go wrong, according to Dr. Kanze’s study.
According to Dr. Kanze, an expert on investor behavior, investors are known for making irrational judgments based on “gut feeling.” As a consequence, she claims, female entrepreneurs get less funding, equity, and valuations, and are less likely to get their businesses off the ground.
Christine Spang, co-founder and CTO of developer API platform Nylas, believes that as a woman, she has lost out on “an immediate feeling of rapport” with both venture funders and other company founders who might build an advising network.
Work-Bench co-founder and general partner Jessica Lin says the business reaches out to female startups it may not have met otherwise to explore investment options. According to Ms. Lin, Work-portfolio Bench’s currently includes 20% female-founded businesses. Spring Health is included, but not Solo.io or Nylas.
“The playing field becomes more even the later you go and the more success you’re able to exhibit,” Ms. Koh said, following the first fundraising obstacle.
Ms. Spang said she had become used to being the only woman in the room eight years after launching Nylas.
Ms. Spang said, “In general, variety is helpful for creativity.” Because of this, she claims, when things improve for women, they improve for everyone.
Other results from Work-survey Bench’s show that San Francisco has the largest percentage of female-founded enterprise tech firms (48.3%), followed by New York (26.8%). Human resources and the future of work is the most popular industry for these businesses, accounting for 35.1 percent, followed by data, artificial intelligence, and machine learning, which accounts for 19.8 percent.
Isabelle Bousqette can be reached at [email protected]
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