• How to Close the Gender Gap in Venture Capital and Private Equity

    A great deal has been written about the gender gap in STEM fields. But what isn’t quite as well-known is the persistent gender disparity in the worlds of venture capital and private equity. Historically, high finance has been a male-dominated endeavor. And despite efforts to promote inclusiveness, the gap remains staggering.

    Here is a closer look at the gender disparities in these fields and the opportunity this presents for forward-thinking firms to gain a competitive advantage.

    Why is the gender gap in these fields so persistent?

    It is a well-established fact that if you are a founder of a start-up and you are female, you are likely to receive fewer venture capital dollars than your male competitors. According to Fortune, male founders received roughly $58 billion in venture capital financing in 2016, while female founders received a comparatively paltry $1.4 billion. Overall, women earned merely two percent of all venture capital dollars last year, a downward turn after those numbers had been slowly increasing in recent years.

    Why such a large disparity? Because when it comes time for funding, far fewer women are represented on both sides of the table. Male founders vastly outnumber female founders. Nearly 6,000 male-founded firms received a venture capital deal last year, compared to just 359 female-founded firms. Meanwhile, only seven percent of partners at venture capital firms are female. Globally, only 16 percent of private equity workers are female, while a mere six percent of global private equity partners are women.

    This means that female-led firms, already greatly outnumbered in the competition for funding dollars, must pitch partners who are overwhelmingly male and may have unconscious biases. This disconnect can be particularly pronounced in industries that historically have targeted women.

    A New Opportunity?

    Silicon Valley has long been interested in exploiting market inefficiencies or assets that are irrationally undervalued by markets for whatever reason. In this case, the underutilization of female talent is the inefficiency. As an industry that has been historically male and slow to change, high finance has been particularly resistant to efforts to diversify.

    However, there is almost certainly a realignment coming, as top universities continue to push for more women in their finance and business programs and the largest venture capital and private equity firms slowly diversify. Additionally, more women are taking matters into their own hands by founding firms or joining accelerators. According to numbers from TechCrunch, 29 venture capital firms started in the last six years have at least one female founder.

    Although this progress isn’t likely to be rapid, its incremental nature does represent an opportunity for companies seeking to recruit untapped talent. Venture capital and private equity firms—and any large organization with people in finance and investment leadership roles—should be cognizant of the effects of the gender gap. Corporate leadership always benefits from a diversity of viewpoints and experiences, and organizations that can bring these different perspectives to bear will ultimately earn a competitive edge.

    The Bottom Line

    Although the gender gap in high finance has been stubbornly persistent, changes are inevitable. Companies that are at the vanguard of efforts to diversify will reap the rewards that will benefit them and women interested in pursuing and growing in this field.

     

    Leave a Reply

    Your email address will not be published. Required fields are marked *