Closing the Gender Gap in Investment

Share on Facebook Share on Twitter Share on LinkedIn Share in Email Print article
Written by Ana C. Rold

While the gender gap in employment has received some much-needed press in recent years, there is another area where increased focus on female representation is desperately needed: the gender divide between men and women in investment and entrepreneurship. With only 36 percent of companies currently owned or founded by a woman, despite the fact that women make up almost 50 percent of the labor force—and with company-owning women reportedly only being half as likely to employ anyone other than themselves—the number of female entrepreneurs remains unenthusiastically low. A similar gender gap in investment shows that while cash makes up 71 percent of the assets women own, it only makes up 60 percent of men’s assets, with much more of men’s assets going towards investments.

This ultimately raises several questions: First, why don’t women see themselves as entrepreneurs? Second, what is stopping women from becoming more involved in investments? And lastly, what can be done to close the gender gap in investment and entrepreneurship?

One of the biggest obstacles to female representation within entrepreneurship is, ironically, the lack of female representation. Indeed, studies show that women around the world are less likely to choose entrepreneurship as a suitable career path due to a lack of female role models within the entrepreneurship space, and are also less likely to pursue becoming top executives due to an absence of mentors they feel they can relate to in senior leadership positions.

Another issue many women face when debating the plausibility of becoming an entrepreneur is a negative self-perception of themselves and other women in startup businesses. According to the Global Entrepreneurship Monitor, women are just as capable as men at identifying potential business opportunities around them, yet women are less likely to believe themselves proficient enough to actually create a successful new business. Similarly, other studies show that while around 50 percent of female managers reported feeling self-doubt about their work performance, only one third of men reported the same lack of self-confidence—and even more worrisome, women also tended to ask for much less during salary negotiations than men.

Lastly, issues with negative stereotypes have had an impact on women’s ability to succeed even before starting a company. In terms of venture capital, for example, of the 6,198 companies that received venture capital funding in 2016, only 359 of those companies were founded by a woman—or just 5.7 percent of companies. Put in terms of actual funding, women received only $1.46 billion of the $59.66 billion put into venture capital in 2016, or a mere 2.4 percent of the total venture capital received.

So why is it that women not only founded startups less frequently, but also received even less funding for it?

An unconscious bias against women in venture capital could explain part of the reason. While the general overall perception of women in entrepreneurship and investing has shifted over the past decade, long-held negative stereotypes of what a woman’s role in the workplace and at home should be still persist even today.

This has created several issues: first, because there are so few women present within the VC sphere, they are often left out of the vast array of important networking opportunities that their male counterparts partake in. Second, the business models themselves within venture capital often lead to men and women remaining within gendered silos, with men catering to male consumers and women to other female customers, thus creating a divide between the two that leaves women with little to no room to navigate into male-dominated spheres. Lastly, the way business owners are judged can often leave women feeling wary due to people’s tendency to judge women in charge based on performance, whereas men tend to be judged based on potential. Therefore, a perception shift is necessary to opening more pathways to women in business.

There is some good news. While men in startups and the investment scene still vastly outnumber women, the overall number of women throughout these fields is slowly but surely increasing. But to accelerate this trend and create more sustainability for women, there are several issues that must be addressed.

First, while many psychologists point to women being risk-averse as a key reason to their reluctance to become more prominent investors, it is perhaps more accurate to view them as risk-aware, or in other words, tending to research risks more thoroughly than their male counterparts. Therefore, encouraging women to create a more diversified and low-cost investment portfolio or to consistently set aside a small portion of their paycheck for investments each month may attract more women to make investments due to the lowered sense of risk small-cost investments can create.

Second, female entrepreneurs and investors who are already established must become role models and mentors for those just beginning in the field in order to not only build a stronger and more supportive community, but to also raise the visibility of women within these spheres.

Lastly, the entrepreneurial ecosystem as a whole must focus on providing women with the resources and support that men often have easier access to, and also emphasize the creation and nurturing of new networks with men in the field in order to foster more diversity and cooperation between the two genders.

Ultimately, while the gender gap in entrepreneurship and investing may appear daunting, shifting ideals in both gender and career roles and how these two interconnect is generating new and exciting pathways for women to lead and succeed in investments, startups and established companies—and though we may have a long ways to go before women figure just as prominently in business as men, the future remains bright.

About the author:  Ana C. Rold is Founder and CEO of Diplomatic Courier, a Global Affairs Media Network.  She teaches political science courses at Northeastern University and is the Host of The World in 2050–A Forum About Our Future. To engage with her on this article follow her on Twitter @ACRold.