Mind the…money-GAP!

By Marilly Douni

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Do you believe that entrepreneurship has to do with gender?
Do you see more women or men while being at your workplace?
Do employers discriminate against women in terms of wages?
Do women get a promotion as easy as men?

You would think that these would be easy questions to answer, but let me tell you, they are not.  So, I decided to seek help and try to approach those concerns using theoretical frameworks.  There are two theoretical frameworks concerning technology and society that, rest at the two extremes of the theoretical spectrum.  Let’s see how each one would approach the issue of gender and startups.

There are people who believe that machines have the power to change us. According to Technological determinism, the use of the Internet may create and enlarge the gender-gap in businesses as people who access technology more easily (and frequently) – that is men – will become more educated, more well-informed so the gender-gap will be broader. As technologies have their own logics, they can cause social changes; and the gender-gap is a huge problem societies face throughout the years. This is a more dystopian point of view as there are others who believe that indeed technology can shape a society but in favor of people as it enhances productivity and productivity is a men’s weapon (do not forget what our grandfathers or grand-grandfathers used to believe: Men should be at work and bring money. Women should stay at home, raise their kids and take care of their household).

On the other hand, there are those who believe that people have the power and that they are the only ones that can change the world. According to Social Determinism, despite the existence of technology, society creates norms and “rules” and it functions by following these rules. For instance, the idea that men are more powerful, more tech-freak and rely on peers, leads to the expansion of the idea that men are better in business terms, so they raise money more easily and are paid much higher than women. In a few words, this is what it should be and this is what society “demands”.

The thing with these 2 frameworks is that they are the extremes.  They assume that one thing will always cause the other.  Technology will cause equality in pay between the two sexes or that societal changes or societal expectations will account for differences in entrepreneurial differences we see between males and females.  But, usually the truth ends up being somewhere in the middle.  And although helpful in providing explanations these frameworks fail to take into consideration the mutual influence of technology and society.  Maybe a 3rd framework, social constructivism, would be more helpful in gaining a better understanding regarding any differences observed as far as pay, entrepreneurship, and development is concerned.

…in terms of Funding!

It is surprising to see (though it is not our current post’s focus) that discrimination in favor of men as far as pay is concerned, may be translated also in terms of competitiveness that is combined with psychological factors rather than socio-economical ones. Piegeler and Bonte conducted a study in 2009 in 36 countries and found out that there is a relevance of gender differences in competitiveness that explains the gender gap in nascent entrepreneurship. More specifically, it was more than clear that competitive situations attracted more males than females, thus, in 32 countries the score of female competitiveness and risk was very low. This is a vital reason/factor why women take less risks and their percentage as self-employed entrepreneurs is lower than men. But of course, this may not be discrimination, but just genetics!

It is generally agreed that women receive less funding than men, when they are about to start a new business. According to a research carried by the National Women’s Business Council, (NWBC), men-owned firms had six times more capital than women! Rose Wang, a NWBC member “Women need money to grow their businesses, and this report gives us more data showing that the capital they are able to secure is insufficient. Our research on this issue enables us to make recommendations to support the entrepreneurial ecosystem, including government, funders and non-profits. We’ve discovered that on average, men start their businesses with nearly twice as much capital as women – $135,000 vs. $75,000. This must change. In order to start closing the entrepreneurship gender gap and truly broaden the pathway for women entrepreneurs, access to financial capital must continue to be a priority” Additionally, the Executive Director of NWBC states that “Accessing capital is a great burden for all, but this research again confirms that the burden is greater for women entrepreneurs – and even among those with significant high-growth potential. Too many women underestimate themselves and their business’s growth potential even though the data confirms that they are more likely, than their male counterparts, to see growth. This is something that must be remedied, and the good news is that it can be remedied” (Bundrick, 2014).

However, even when women are part of a venture-funded startup’s management team, there is only a small percentage (19%) that ends up being co-owner of the startup. Katie Rae, Managing Director of Boston Venture Capital firm says that “In venture what you hear all the time is it’s impossible to get funded. That’s the language we use, and therefore women look at it and say, ‘I’ll just figure out another way.’ So they bootstrap for a much longer period of time and don’t raise capital. It’s not that their ideas are worse — in fact a lot of it is women opting out” (Borchers, 2014).

Kathryn Minshew, co-founder of The Muse company (a woman with high levels of experience in business as she used to work at McKinsey & Company), tried to raise money for her female-focused startup e-job that was growing 30% a month and reaching 250.000 followers and active users every single month by 2012. While trying to raise money, she found herself in a very difficult situation. “When it’s hard, you think it’s hard for everybody. But going through it last year, there were a couple of situations where it was impossible to ignore that it would have been very different if I had been a guy” (Davis, 2013).

One could ask “But why is this happening? Women are more social than men”. This is true (O.K. I am a woman and I have to support that. I also study Communication & Social Media, so I score two out of two!). If you ask some of these guys they will say “Women are not that good at being bosses or raising money”. Does this remind you the one we used to listen while we were at school “Girls are not that good at math and science in comparison to boys”, or, “Women are not interested in starting businesses”? Of course, nothing of this is true. So, what’s wrong?

  1. Women belong to wrong networks

While men go to technology events and are aware of tech investors, women are not that well connected compared to men.  This means, that they do not create the correct networking necessary in order, for instance, to begin a startup or to raise money. Additionally building a network circle may help to increase the record of success; Lakshmi Balachandra, assistant professor of entrepreneurship at Babson College states that “Investors love investing in entrepreneurs who have come back after making a lot of money and have a new idea. Not having the initial introduction, not having the same background makes it hard” (Devaney & Stein, 2012).

  1. Toys for boys

There is general idea that investors like to fund companies that make toys for boys as it these are closer to their interests. Balachandra says “The male view of what is venture-backable and high-growth tends to be technology, hardware or software. If they don’t immediately see the market potential, they will pass. VCs always want to be the experts. They never want to admit they don’t know something” (Devaney & Stein, 2012).

…in terms of Pay System!

The same holds true for both males and females pay system in startups. New companies, that host new ideas, new philosophy, or a more unbiased environment, tend to become like the old companies in terms of payment meaning the females are paid much less than men. For instance, in the US, for every woman who receives 77 cents, every man gets one dollar[1].

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[1] According to an analysis of salaries of 2300 employees from small businesses and startups that came to the surface from Justworks, a human resource firm.

Of course, the pay gap is attributable to the variety of tasks assigned to males and females. For instance, technology sector which is mostly comprised of males, offers better wages than others. Also, more established companies like Google and Facebook, host mainly males instead of females. Additionally, the pay system is constructed according to the position/title people hold. The higher the position, the bigger the wage! But it is very interesting to have a look at the below table and identify the number of females that hold such high positions in comparison to males:

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If we carefully examine the above numbers, we will see that, the higher the position, the more male-dominated the internal environment of a firm is. For instance, while female founders constitute the 22% of the business population, men constitute the 78%! That, of course, does not mean that women are less smart than men, but they have limited opportunities, they dial back their careers to raise their kids, they tend to work less hours as they have to be early at home to take care of the everyday activities.

Technology does not recognize gender!

With no doubt, new knowledge makes people more powerful and more achievable. The way women and men use digital technology makes them not only more knowledgeable, but also more connected and much more effective; This is the so-called Digital Fluency model, a term coined by Accenture to portray the extent to which females and males use digital technology to advance throughout their career years. This term was used in a survey of about 4900 men and women, in 31 countries and combined the digital fluency along with peoples’ educational-employment-and advancement levels (Career Achievement).

4.png

According to the above diagram, in countries like USA, Netherlands, Australia, Sweden, Denmark, Norway & Finland workplace equality is much higher as women score extremely high in the Digital Fluency Model (just take a look at their digital fluency ranking along with their education-employment and advancement). If you look for instance, Saudi Arabia you will see that women’s digital fluency is high but the rest of the criteria is not, so, despite of digital fluency, cultural factors play a great importance.

5.png

According to the above diagram, the higher the rate of digital influence among women, the higher rate of gender equality in the workplace. Since a lower rank means women are doing equally good or even better in relation to men, Netherlands, Nordic countries, USA and UK have higher scores over workplace gender equality.

Education is one of the key roles in gender equality. As education increases, digital fluency increases, so there is a gender-gap reduction. In some countries, women are more educated than men. So, as digital fluency increases, women’s ability to find jobs increases:

6.png

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In all of the three generations (Millenials, Gen X and Baby Boomers), males are paid better in comparison to women.

The presence of Government of each country at this point plays a vital role as if businesses could offer more tools for women to become more digital fluent in a shorten period of time, countries could shorten the time to workplace gender equally. Just see the below diagram to see how many years developed and developing countries need to close the gender gap at work:

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(Accenture, 2016)

Six brief testimonials from abroad that show that women can succeed in fundraising but face a lot of barriers!

Nicole Sanchez – Vixxenn

Nicole Sanchez, Founder of Vixxenn managed to raise capital her startup but, even then, she admits that it was really difficult to explain to her male investors the reasons of why Vixxenn would be a good and profitable startup for women.

However, against all odds, she managed to raise money and that gave her more clarity concerning her business objectives and targets. “I met my lead investor, Charlie O’Donnell of Brooklyn Bridge Ventures a year before I started raising. We kept in touch and he had a chance to see my business evolve. My biggest advice is to invest in relationships, seek people for advice and not funding, and you’ll build the relationships that will make you well positioned for a raise” (Giang, 2015).

Jessica Richman – Ubiome

Jessica Richman, is the co-founder of Ubiome. Jessica’s experience was really “weird” as her first fund-raising effort was under her fund-raiser’s flirt. “”We had a lot of crazy experiences, including when this one angel[1] invited me up to his place for a late night meeting and I showed up with my cofounder, who is over six-feet, five-inches and built like a tree. It was kind of awkward for him, I think. He kept on trying to be flirty and then sending my cofounder these weird glances” (Giang, 2015). Another issue Jessica faced is the usual question “Are you a co-founder? You?”. And of course this is something that really upsets Jessica who believes that people assume that if you are a woman you lack the skills or you are not smart or aggressive or even competent enough to have your own business. Finally, Jessica suggests “Talk about aggressive things you’ve done. You don’t have to say it in an aggressive way, but let them know that you are a former wrestler, that you traveled around the world by yourself, that you started a company in high school, or whatever you have done that they will think is badass. You don’t have to be defensive or have a chip on your shoulder, but I think you need to disarm those assumptions up front” (Giang, 2015).

[1] Angel stands for Fund-raisers!

Mada SegheteBranch Metrics

Mada is a co-founder of developer tool Branch Metrics and she is the only women in her team! Though Mada agrees with the observation that women fall behind in fundraising compared to men, she argues that it is an issue of self-confidence. she advises female entrepreneurs to take the  focus away from the fact that they are women and rely on their idea and believe in it in order to convince others. “I have watched guys and girls pitch in my classes at business school, at launch competitions, and startup weekends and most times the guys are more confident when they pitch. I think if we solved the confidence issue and start believing that we are no different, our chances of raising money will become just the same. It’s a self-fulfilling prophecy” (Giang, 2015).

Mona BijoorJoor

Mona is the founder and CEO of Joor. According to Mona, venture funding has to do with trends.  “While you’re raising money, figure out what kind of partner you want. “Do you want partners who are going to help with strategic and operational issues or partners who will let you run the business and stay out of your way? There is merit to both, but knowing what you want before you start to raise capital will help you to not be disappointed with the outcome” (Giang, 2015).

Fern MandelbaumVista Venture Partners

According to Fern, a woman is as able as a man to raise money because everything has to do with leadership, and women can be leaders. “To raise money, you need to be a great leader, a person who inspires others,” says Mandelbaum. “A founder needs to attract the best people, since it’s your team that is critical to build an awesome company. Confidence and passion are key” (Giang, 2015). Fern advices women to not be discouraged. As she says, it may take a little longer, but eventually it will be a fact!

Umaimah MendhroVida

Umaimah admits that there is a gender gap in new businesses but this has to do with the fact that women do not dare to ask for something! “There’s this idea that we don’t ask to get a higher salary. We don’t tend to negotiate. Statistically speaking, we tend to kind of feel that, if we’re doing a great job, it will be recognized” (Giang, 2015).

As a summary of all of the above that you read today, whether you are a woman or a man you will agree that there is a gender-gap in new (and old) businesses. However, this gap is not created because we, women, are less capable or we are unable to compete, but I believe that our nature is structured in a totally different way than that of men as they are more competent, more dynamic in their business environment and they rely a lot on their peers to make the next move.

We, women, on the other side, are more sentimental, and we love waiting for the right moment! Additionally, indeed, technology, helps a lot both males and females to enter an industry, raise money, get well-paid, and start a business. Still, the issue of funding in females persists and will continue to persist not because of women’s lack of abilities but because there are not a lot of women in entrepreneurship. This is the so-called pipeline problem. What women have to do is to believe in themselves, be very well-educated, dare to leave their houses and make the next move in order to confront challenges. After all don’t forget that a woman, Sandra Lerner, was among the co-owners of the first and biggest startup ever, Cisco in 1990!  As a social constructivist would say, it is just a right mix of availability of technology and societal affordances that help explain these differences.

However, do not forget that…..https://www.youtube.com/watch?v=wd1-HM234DE

Hope you enjoyed!

References

Accenture. (2016). Getting to equal: How digital is helping close the gender gap at work. [Powerpoint  slides]. Retrieved from http://www.slideshare.net/accenture/how-digital-is-helping-close-the-gender-gap-at-work

Bonte W. & Piegeler M. (2012). Gender gap in latent and nascent entrepreneurship: driven by competitiveness. Small Business Economy, 41, 961-987. Doi: 10.1007/s11187-012-9459-3

Borchers C. (2014). Study finds women still lag in startup funding. Retrieved from https://www.bostonglobe.com/business/2014/09/30/male-entrepreneurs-get-six-times-funding-women-led-startups-study-finds/7Y9Gy8t5ZDFdiRSE8uUIOI/story.html

Bundrick H. (2014). The Startup gender gap: Men get 6 times more funding than women. Retrieved from https://www.mainstreet.com/article/startup-gender-gap-men-get-6-times-more-funding-women

Davis N. (2013). Money matters: why women founders struggle in Silicon Valley. Retrieved from http://www.theverge.com/2013/3/6/4067276/money-matters-why-women-founders-struggle-in-silicon-valley

Devaney T. & Stein T. (2012). Menture capital? Why women-led startups get less funding. Retrieved from http://readwrite.com/2012/06/26/menture-capital-why-women-led-startups-get-less-funding/

Diamantaki K. (2016). Digital media and CMC. [Powerpoint slides].

Giang V. (2015). Six women entrepreneurs share how they raised VC funds. Retrieved from http://www.fastcompany.com/3040738/strong-female-lead/6-women-entrepreneurs-share-how-they-raised-vc-funds

Pack E. (2015). Even hip startups pay women less than men. Retrieved from http://www.huffingtonpost.com/entry/gender-pay-gap-startups_us_56708ce8e4b0dfd4bcbfcd41

 

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