Why Do Venture Capital Funding Disparities for Women-Owned Startups Still Exist?


Foodspotting, a Silicon Valley technology company, has created one of the most delectable iPhone apps: it features not just nearby restaurants, but the most popular dishes that are closest to you: cobb salad just .2 miles away, cheese enchiladas right near the subway stop. Perfect temptation for hungry foodies.

The woman-led company is doing well by many standards, including its ability to successfully pitch to venture capitalists. Foodspotting raised $3 million in Series A funding in early 2011, soon after the product reached one million downloads. Previously the company had raised around $750,000 in seed funding. Foodspotting’s founder, Alexa Andrzejewski, has been featured in Inc Magazine’s “30 Under 30” and Gourmet Live’s “50 Women Game-Changers” in food.

Andrzejewski’s success aligns with the conclusions of a fledgling study being conducted by Babson College’s Lakshmi Balachandra. Focusing on MIT entrepreneurs, the study thus far has revealed that when women pitch their companies in a business-pitch competition in which the prize is a $100,000 check, they are at least as likely to advance in the competition, and to win, as their male competitors.

The study is encouraging given that, overall, far less venture capital flows to companies with women founders. Though women currently own 46 percent of all small businesses in the United States, generate $1.3 trillion in revenue, and employ 7.7 million people, Dow Jones Venture Source says that of the companies that received a round of venture capital financing in 2010, only six percent had a female CEO, and seven percent had at least one female founder. While smaller enterprises may not always require capital—or at least not quite as much as Foodspotting raised—big-vision technology companies usually require that much venture-backed support.

A number of factors have led to the VC funding disparity, including access to the right networks. When Andrzejewski began pursuing her company’s $750,000 seed round, she said “I didn’t really know a lot of funders, but I printed out all of the profiles of investors on Angel List ,and I pursued the ones who demonstrated interest in companies similar to mine.”

As CEO of Foodspotting, Andrzejewski has led the company’s pitches, which were targeted primarily at male investors. Though she has clearly been successful, pitching Foodspotting to tough investors was no cakewalk (pun intended).

But when Kati Bicknell recently pitched Kindara, a reproductive health and fertility product, to an all-male panel of judges, she encountered a particularly tough environment. (I’ll be writing more about Kindara and other similar mobile apps for a future column.) Kindara helps women track their fertility on their mobile devices using the symptothermal method. After Bicknell made her pitch—she was the only woman in the competition—jokes about “fertile markets” and “penetration” abounded from the judges’ panel. Though Bicknell shrugged off the comments, ultimately tied for first place, and is poised to raise more money, the man who also won this pitch competition recently wrote a raw, honest blog post about his perspective of the event: “Before Kati’s presentation even started, it felt like the men in the room suddenly reverted to Junior High,” he writes.

Beyond not having access to the right networks or having to endure dudebro jokes, there is a more fundamental reason behind the capital disparity in fields like tech: the nexus of technical expertise and business drive. The fields tech investors find most attractive are science, technology, engineering, and mathematics (STEM). But women in STEM are more likely to pursue academia than they are business. According to Balachandra, women in STEM are less inclined to launch venture-fundable companies. This can contribute to perception problems when women pitch, as investors are drawn to people with a track record of building profitable companies.

“When they met with me, some investors would say they’d like us to bring on a ‘real’ CEO,” Andrzejewski said. “I could tell they wanted someone who fits their archetype of a CEO.”

Women in STEM are also not filing patents at the rate of their male colleagues, Balachandra says, and overall they are not realizing the economic potential of their STEM backgrounds—something that contributes to disparities in wealth between women and men throughout their lives. This divergence in career paths among women and men who both have technical backgrounds seems to point to something so innate about women, men and money—women overall just don’t seem to be as focused on big bucks. And—one pervasive problem we’re all tired of hearing about—work-family-balance issues play a role as well, especially given how demanding startup life can be.

But there is promise that women who do choose to launch a startup can do well in securing capital, as evidenced by Andrzejewski, Bicknell and Danielle Morrill. Morrill is the 27-year-old founder of Referly. A coder and a CEO, Morrill handles all investor pitches and has successfully raised funding for Referly. She and her cofounders are graduates of the competitive Y Combinator program for startups.

“People assume I can’t code, that I don’t have a technical background since few women in my field do,” she said. “And when they see me at trade shows they assume I’m just a PR girl, a booth babe.” The annoyances don’t phase her. She says that as long as she stays the course and focuses on her business, people around her eventually catch on.

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