The struggle to raise

Across the globe, the effort of women to start small businesses is hamstrung by access to capital. Secretary of State Hillary Clinton addressed the issue in a series of speeches and many organizations are working to help solve the problem. “[Women] raise 70 percent less money than men do because of their lack of access to capital,” Lesa Mitchell, Ewing Marion Kauffman Foundation vice president of initiatives on advancing innovation, told The New York Times last June.

The issue extends to the high-tech community. The Diana Project found that just five percent of VC-funded businesses have a women on the management team, while the Center for Venture Research at University of New Hampshire reported that just 9.4 percent of the startups that took venture capital in 2009 were women-run. Dow Jones Venture Source echoed the findings in another study, finding that only six percent of the startups that took one round of VC in 2010 had a female CEO and just seven percent boasted a female founder. Although women represent less than five percent of the CEOs at Fortune 500 companies, they made up 31 percent of business school students in 2012 (up from 26 percent a decade ago) and earned 18 percent of all computer and information sciences degrees in 2008.

Part of the issue is the structure of the venture community. "VC is a network-based process. You basically fund somebody you know or somebody who knows somebody you know. It's a really tight connection," Patricia G. Greene, a professor of Entrepreneurship at Babson College and current National Academic Director of Goldman Sachs' 10,000 Small Businesses project, says.

“There’s a soft bias toward doing things that are familiar. That's white male nerds.”

The reason to fund a company or to not fund a company frequently comes down to a gut feeling. Do you believe in this person? Money men look for people who are a younger, better, smarter version of themselves. It's human nature. The typical funder is an old, straight, white male, hence the typical fund-receiver is a young, straight, white, male. “There’s a soft bias toward doing things that are familiar. That's white male nerds.” Dave McClure, founder of seed fund 500 Startups, says, “I think we are making progress. Now it's brown and yellow nerds that get funding.”

This isn't overt sexism; it's simple psychology. Alisha Ramos, who wrote an undergraduate honors thesis on female funding while a student at Harvard and now works as a brand consultant, agrees with McClure. While many of the women she interviewed were adamant that their gender was not an issue, Ramos did find that, "The whole ecosystem is very gendered male. In the end, I think there is always going to be some sort of gendered bias on behalf of males, even if they are not aware of it."

The male-gendered tilt manifests itself in two ways. There are inherent differences between how traits are perceived. "I don't want to blame men, but it's almost like it's a different language,” Laurel Touby, founder of mediabistro.com which sold for $23 million in 2007, says. “What they see as confidence in a male, they may see as charm in a female. They may see leadership in a man, but charm in a female. They would fund leadership, but they might not fund charm.” (Disclosure: I was an employee at the time of the sale.)

“If I were a guy, you'd call this charisma. If I were a guy, you'd call this leadership.”

When Touby was attempting to get funding for her company, she received a list of questions from a potential investor and realized that they were ones that a man would not have to answer. "If I were a male, he would say I had everything it took to be a successful entrepreneur. But because I was a woman he was considering those things as something different, something not quite up to snuff," Touby, who did not want to share the specific queries, says. "I responded to him in male terms. 'If I were a guy, you'd call this charisma. If I were a guy, you'd call this leadership.' I ended with 'I am woman. Help me roar.' He recognized that he may have been trying to put me into a mold and was looking at me through the wrong filter." Touby still calls her answers the "$1 Million Memo" because he eventually invested $1 million.

Cheryl Kellond experienced this likely unintentional bias first-hand when she was attempting to launch Bia Sports, which planned to make and market the first GPS sports watch targeted to women. She met with a number of VCs in an effort to secure funding, but they failed to see her perspective, which was that female runners were desperate for a device made specifically for them. "I was talking about sports and running, and everything I said was open to question," she says. "One time, I stopped and I said, 'You know what? You're illustrating the gap in the market right now. Everything you just asked about is what Garmin is doing and it's exactly why half the market is sitting on the sidelines. You're proving my point with your questions.'" She continues: "If I had sent my tall, good-looking husband in to talk about the same market specifics, it would have been unquestioned."

Furthermore, when Kellond did find an investor willing to listen, she ran into another problem. “We got a lot of 'Let me show it to my wife and see what she thinks,’” she says. “I don't want an investor who is going to gut-check everything with his wife.” In the end, she turned to Kickstarter, and more than $400,000 later, Bia Sports is in business.

Although it happens relatively infrequently, overt sexism surfaces, too. "I think the concern [from VCs] is that [the women] are going to get pregnant and go home with their families. That's usually what we hear," Greene says. "I really don't think there's a lot of 'The little lady can't do that,' but I do think that there remains genuine concern that 'If I invest this much money in you, how do I know you're going to be around?'"