Funding stalls for female- run start- ups, but one possible reason may surprise you
It may matter if the product is aimed toward men, women
Jeannine Shao Collins, left, was once asked why the TV show “Girl Starter” was targeting a niche market. “I said, ‘ Niche? It’s 50% of the population.’ ” GIRL STARTER
Jeannine Shao Collins took her 16year- old daughter’s idea for a way to champion young women entrepreneurs and ran with it in 2014.
Girl Starter is a reality television show that centers on 18- to 24- year- old entrepreneurs who compete for $ 100,000 and guidance from a network of mentors.
Fresh off its first season on Discovery TLC, the show toured several cities casting for its second season in May and June.
Collins got there without funding from venture capital firms. Instead, sponsors, including Staples and Microsoft, saw a market where venture capital firms didn’t.
Collins’ experience isn’t unlike that of a lot of women looking for funding to get a new business off the ground. Just 4% of funding from U. S.- based VC firms through July 13 of this year went to women- founded start- ups in their earliest stages, known as angel or seed funding, figures from PitchBook, a private capital data and research firm, show. Early- stage VC funding, the next level up, shows a similar pattern at 3% so far this year.
Both sets of figures are unchanged from 2016.
And when it comes to late- stage fundraising, female- founded firms got just 1% of capital, also stagnant compared to 2016.
Some of the barriers included oldfashioned stereotypes. In some fundraising meetings, finance- related questions were directed at her husband and co- founder Chris Collins, a marketing executive, rather than Jeannine or female co- founder, television writer Da- ni Davis. Once, the team was asked why Girl
Starter was targeting “such a niche market,” Collins says. “I said, ‘ Niche? It’s 50% of the population.’ ”
But the bias that leaves some womenled businesses unfunded may come from a different place. Preliminary results from one study led by Babson College professor Lakshmi Balachandra looked at how much the masculinity or the femininity of the target market matters in funding decisions.
For instance, male VCs saw firms with products aimed toward men as more likely to get funding, while femaleled VCs said the same for products aimed at women.
“It was shocking. Investors go straight along gender lines,” Balachandra says. Men “want to see a male market run by a man. And women prefer women’s markets run by women.”
When women do get funding, it’s often less, says Loretta McCarthy, managing partner of Golden Seeds, pointing to the lack of women in decision- making roles at VC firms making larger investments. Golden Seeds invests in early- stage companies led by women.
“Borrowing money is about relationships. It’s the people you know and the people they know,” says Sheri Orlowitz, founding partner at Artemis Holdings Group, a VC firm.
An analysis from TechCrunch last year concluded 7% of partners in the top 100 VC firms were women.
Rana el Kaliouby, CEO and co- founder of artificial intelligence firm Affectiva, says the networks she formed at the Massachusetts Institute of Technology’s media lab, where the company was created, were invaluable when seeking VC funds.
Still, having a male chairman has helped.