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Women are the most rapidly growing group of entrepreneurs in the country. In fact, female-led businesses outperform those of their male peers in many venture capital (VC) portfolios.

Yet, less than 10 percent of venture-backed companies have a female founder and less than 1 percent have a black female founder. Female-led startups only received 2.2 percent of total venture capital funding in 2018.

Investors claim that the lack of funding for diverse candidates is a pipeline problem, meaning they can’t find any female or minority females founders with whom to invest. However, it’s clear that it’s not a pipeline problem; biased structures limit women from accessing funding and support as easily as their male counterparts.

The way we construct and invest in the entrepreneurial ecosystem has to change. If female entrepreneurs are to gain more funding, traditional power bases must become more inclusive. To create a more immediate impact, women leaders can help disrupt the sector in a few simple ways to help themselves and each other earn more equal opportunities for funding and success.

1. Use Diverse Decision Makers

Nearly 92 percent of investment partners in the top 100 VCs are white men. It’s not surprising that a large majority of funding goes to similar demographics. But the system isn’t just going to change overnight. For their part, female-led startups should look for investment opportunities outside of traditional VC networks and Ivy League schools. Instead, try networking with a more diverse group and actively seek out female venture capitalists. Chloe Capital and SoGal Ventures are two examples of venture capital firms led by women seeking to fund only women-led businesses. As female entrepreneurs utilize more diverse sources of funding, they can start to diversify decision-making in the sector, and also support other women and minorities, creating an equal and unified entrepreneurial environment. 

2. Redefine Cultural Rules

The rules that help cradle patriarchal, unconscious bias in the venture capital and business spheres need to be redefined. Female founders can help lead the way for the cause by promoting and supporting entrepreneurial cultures and sourcing standards that redefine and level the playing field.

First, female-led startups should start by creating new work cultures that promote diversity, equality, respect and inclusion. The #MeToo movement helped pave the way for female business leaders like Susan Fowler, Elizabeth Scott and Amelie Lamont to speak out about the harassment they’ve experienced, showing that attempts to isolate and demean female founders are pervasive within every industry. Since the ecosystem stacks its odds against women, a dedicated refocus should be set forth to maintain more equal rules of conduct.

Second, to change the culture, female entrepreneurs should encourage every industry to turn previously biased competition practices into avenues for support and transparency. One way is through redefining pitch competition. 

Pitching a business is often the best way to prove your company’s worth, but women are disadvantaged due to bias. While men get asked promotion-oriented questions, female founders are instead asked “prevention-oriented” questions

Thankfully, recent innovations are helping to reduce that bias. For example, Village Capital uses a peer selection model while Springboard Enterprises has a “dolphin tank” which focuses less on competition and more on channeling expertise from industry professionals who can help female entrepreneurs succeed.  

3. Create Coalitions and New Systems of Power 

Most female founders try to assimilate to the structures set before them, hoping it will allow them to compete with the “big boys.” However, this mindset still leads to inequality because it doesn’t address the underlying problem. 

Underrepresented groups should continue to ‘lean in,’ but if they want to create a true revolution they have to join and promote new power coalitions and movements that support them. Recently, the surge of new investment funds for women by women — think Ellevest’s Impact Portfolios and The Female Founders Fund — help equalize existing power structures. Further, crowdfunding financing platforms, like iFundWomen and Seed Invest, tend to create better opportunities to redistribute entrepreneurship and democratize the venture capital space. Other female founders are acknowledging their power to disrupt the industry by joining forces with initiatives like the #FoundersForChange coalition, whose signers commit to promoting and advancing racial and gender diversity in their investment decisions.

Female leaders have the power to disrupt traditional VC culture through diversity, solidarity and actionable coalitions that propel the idea of equality forward. As more women utilize these principles, they can transform the systems that have acted as barriers to fair and equal funding — and ultimately improve the level of success for female entrepreneurs across the country.

About the Author(s)

Debrah Lee Charatan

Debrah Lee Charatan is an entrepreneur and real estate veteran widely recognized for her experience brokering, investing and developing commercial, residential and mixed-use properties in the New York City area.

President, BCB Property Management
Debrah Lee Charatan SCORE