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Female entrepreneurs are treated differently by venture capitalists (and given less)

As tech continues to take over the world, startups are springing up everywhere. However, female entrepreneurs are less eager to try their luck.

After years of explosive growth in the tech industry, venture capitalists are becoming more cautious with their cash.

The demise of startups such as Shuddle, Homejoy and Vatler, all of which were tipped to reach unicorn status, has seemingly spooked VCs. As a result, new startups are being shunned as investors look to minimise their risk and put their money in the hands of established ventures.

The increasing difficulty of finding funding has made the life of an entrepreneur slightly more difficult and largely more unpredictable – especially for females.

Female entrepreneurs - Compelo

There has long been talk of the gender gap in the startup world. Just 17% of new ventures are founded by women. That has remained unchanged since 2012, despite the amount of newly formed startups climbing each year.

Some will claim that most women simply aren’t interested in pursuing a career in business. However, a recent study suggests that there might be another reason for such a low female population.

Female entrepreneurs - Compelo

Is there a bias against female entrepreneurs?

A team of researchers looked at the type of questions that startup founders were asked at TechCrunch’s Disrupt event between 2006 and 2016. They found that investors tended to ask male entrepreneurs promotion-focused questions, such as potential for growth, while females were asked prevention-focused questions, such as how they will cope with risks and loss.

It was found that those asked promotion-focused questions raised a higher amount of funding, while each prevention-focused question asked reduced funding earned. As a result, startups founded by women tend to get much less than those founded by men.

In fact, Harvard Business Review reported that just 2% of VC funding is given to female entrepreneurs, while male-led startups receive five times more funding on average.

Female entrepreneurs - Compelo

There have been plenty of ideas offered up on how to close the business world’s gender gap. The tech industry is focused on getting young girls interested in computers. However, it doesn’t seem that interest is the only issue. Not only is there a gap, but there is quite clearly a bias too.

If females are commonly shunned and rejected in the business world, why would they bother to give it a go? Rather than trying to fix the bottom, we first need to fix the top.

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