If you think tech founders are motivated to start their companies by money, you are wrong. Only a small percent of male founders (15%) and a tiny percentage of female founders (2%) are motivated by money, according to Gender Differences in Entrepreneurship: Voices of Founders and Funders conducted by Illuminate Venture, a venture capital firm. For most, their primary motive is to bring their ideas to market: 70% of women and 60% of men have this goal.
The higher motivation among women is consistent with The 2017 Kauffman Index of Startup Activity: National Trends, which found that women are more opportunity-driven than men. Kauffman is the largest nonprofit researching entrepreneurship
And yet, only 15% of US venture dollars in 2017 went to teams with a female founder, according to All Raise, a nonprofit that wants to increase the percentage of venture funding going to companies with a female founder. The 15% number differs from the often cited 2%, which refers to all-female founder teams. The reality is that homogeneous teams perform less well, so having a diverse team improves the performance of venture-backed companies, according to research conducted by Paul Gompers and Silpa Kovvali of Harvard Business School. This is consistent with research by First Round Capital, which found that companies with at least one female founder performed better than those with all-male founding teams.
This means that VCs and the world aren’t capturing a potentially huge source of innovation, which could make a long-term positive impact on US economic growth. Cindy Padnos, founder of Illuminate, wants to ensure that the world doesn’t miss out. That’s why she undertook this research as well as High Performance Entrepreneurs: Women in High Tech in 2010.
The more we understand the attitudes of funders and the perceptions of VCs, the more likely we are to fix the underfunding of female founders. That’s why this research was undertaken.
When it comes to entrepreneurial success factors, men and women have a lot in common: two-thirds of both ranked resilience and perseverance as one of the top success factors. Nearly half of all founders ranked vision and passion as a top factor. Founders take note: in addition to resilience and perseverance, VCs thought business and domain expertise, and ability to attract a great team were also very important. Interestingly, founders and VCs agreed that having a STEM degree and prior startup experience were NOT very important. May be that Bachelor of Liberal Arts degree has its value.
The top two barriers for founders are the need for financial security and access to capital. The top barrier identified by 49% of men was financial security vs. 42% for women. The top barrier identified by 58% of women was access to capital vs. 37% for men.
VCs differed from entrepreneurs in their perception of barriers founders face. Tops on the list for male VCs was access to the right networks to build their team, followed by having a unique idea. For female VCs, access to capital rose to the top of the list, followed by having a unique idea and access to connections that can help build the team. Founders take note, with the exception of access to capital, if you want to assure VCs you’re a good investment focus on improving these attributes.
In keeping with other research, women displayed more concern about being an imposter — not having the qualification,the right connections and the confidence — than about not having a unique idea.
The research also busts myths that:
- Women are very concerned with work-life balance. Among high-tech founders, men were more likely to mention the work-life equation as a barrier than women: 31% vs 17%, respectively. Listen up VCs: no need to be concerned about motherhood being a distraction for high-tech female founders. They’ve got it under control.
- Women are more risk-averse than men. Among high-tech founders, men feared failure more than women and were more concerned about financial security.
Given that only 15% of venture dollars go to teams with a female founder, it is no surprise that nearly two-thirds of women felt they are handicapped in raising capital compared to men, and 40% felt their success is hampered by the lack of female VCs.
How do you compare to those of high-tech founders and VCs?
