According to the Harvard Business Review, less than three percent of companies led by women receive venture capital funding. This statistic is often cited when discussing the lack of gender diversity in the venture capital industry. But what does it mean? Why is this number so low?
There are several reasons why women are less likely to receive this type of funding. One is that venture capital firms are predominantly male-dominated and tend to invest in companies that reflect their own backgrounds and networks.
Women are more likely to start businesses in sectors traditionally viewed as “non-traditional” for venture capital investments, such as healthcare and consumer products, and ask for smaller amounts of funding than men, making them appear less likely to investment.
The good news is that steps are being taken to address this imbalance. A growing number of venture capital firms are focusing on investing in women-led companies, and How Women Invest, the arm of How Women Lead, is working to connect female entrepreneurs with potential investors.
“To succeed in a male-dominated world, women need to create their own systems and networks and support other women,” says Julie Abrams, founder and CEO of How Women Lead.
“Too often, women are pitted against each other in the workplace, rather than being seen as colleagues. This needs to change. Women need to come together and support each other to create a level playing field. When women help each other, everyone benefits.”
Studies have shown that companies with more gender diversity are more profitable, and yet women still make up only a small percentage of senior roles in most organizations. If we want to see real change, women need to lift each other up. We need to create our own opportunities and networks and make our voices heard. Only then will we be able to achieve true gender equality.
According to a McKinsey & Company report, women will inherit most of the wealth in the coming years. And yet, only a fraction of that wealth is currently invested in women-owned startups. Why?
Abrams argues that the report lists several reasons for this, including a lack of awareness of the opportunities available to women and a lack of access to venture capital. She also makes a compelling case for why investing in startups can be a powerful way for women to increase their economic power and close the gender wealth gap.
Investments in startups can provide women with financial returns and a sense of ownership and control over their own economic future. Furthermore, by investing in startups focused on solving social and environmental problems, women can help create a more equal and sustainable world.
The bottom line is that good things happen when money is put in women’s hands. There is a mountain of evidence showing that when women are given more money and opportunities, society benefits. When women increase their wealth, they tend to share it with their families and community-oriented businesses, which boosts the local economy.
Article originally published by Forbes.