Women who found their own companies have a harder time getting funding than men, but some women CEOs are changing the game. This observation is likely unsurprising to most women entrepreneurs, and the data is clear. Recent reporting revealed that investments for women-owned companies dropped 22% in 2020. However, certain organizations are getting ahead of the gap and making headway in the field of investments.
Better Outcomes for Women Entrepreneurs
Currently, these investments comprise a meager 2% of all venture funding, a low point women haven’t seen in over half a decade. That 2% figure reflects poorly upon the investment industry in general. However, it’s not consistent across all segments of the market. Village Capital, a firm headed by CEO Allie Burns, owns a portfolio consisting of a strong 46% women-owned or woman-led assets. At a recent conference panel, Burns noted, “We also are seeing a lot more diversity in terms of geography, race, [and] ethnicity in our portfolio.” The observation alludes to the idea that some of the issues at the core of the current slump go beyond gender—therefore, their solutions are also intersectional.
Burns went on to explain that new companies who complete Village Capital’s accelerator program are encouraged to take part in peer reviews. These reviews help companies compete among themselves to determine which are most deserving of investments. Burns affirmed that the peer review process has helped to flatten gender bias in their business model.
PiggyVest, a digital savings platform based out of Nigeria, was one of those companies. COO and co-founder Odunayo Eweniyi spoke highly of the accelerator program. The format was valuable, she thought, because “you’re asking questions about people’s businesses that you ordinarily wouldn’t ask.” This process creates a unique crowdsourced perspective on a business’s value. Eweniyi has since leveraged PiggyVest’s success to pay it forward and grant startup funds to several other women- and minority-led businesses.
Accelerators May Not Be the Magic Solution
Unfortunately, most accelerator programs don’t operate under Village Capital’s model. In fact, traditional accelerator programs have made the gender gap demonstrably worse. This is believed to be not only because of the investment industry’s well-documented sexist streak, but also because male investors tend to enter such programs at an advantage over their female counterparts. Men entering the world of business and investment tend to come to the table already in possession of more resources and connections than a woman in the same role.
Research shows that accelerator programs are not inherently good for women investors, or for democratizing investment in a wider sense. Somewhat shockingly, the same research indicated that traditional accelerators have no positive influence whatsoever on a female founder’s chances of raising equity for a startup. Contrast this with male founders completing accelerator programs, who were shown to raise as much as 2.6 times more equity compared to their female competitors.
What’s the Takeaway?
The currently widening investment gender gap isn’t going to be solved by accelerators alone. In their current format, accelerators are too susceptible to influence by resource-rich founders and only serve to make the gap worse. For an accelerator to have a chance at wide-ranging success for women, close attention must be paid to the format of the accelerator program and the criteria by which investment funds are disbursed.
Accelerators and other competitive programs that prioritize peer review and democratic models of allocating funds could indeed help narrow the gender gap, as well as the inequities faced by other minority founders. Robust loan and grant programs to allocate startup funds specifically to women- and minority-led businesses likely represent the best short-term solution for addressing the gender gap. Fortunately, there are a growing number of such opportunities available for both private and public funding.