4 ways to fix the gender gap in Australian VC funding for female founders

That there is a huge gender gap in venture capital (VC) funding is hardly news; even ChatGPT knows it.

This is despite the progress that women have made in business  generally.

According to a 2021 report by PitchBook, companies founded solely by women in the US and Europe received just 2.4% of total venture capital funding. Australian investors, while they fared slightly better at 5.4%, still commit far less to female-led startups  than justified. 

So the problem is real. But instead of encouraging local female founders to just give up and head overseas to raise the capital they need, I endorse playing the long-game,  championing a future-focused model of grassroots gender equality, and lobbying  government, industry, and education to do better. 

Provide mentorship, networking & sponsorship 

Because female founders face deeply ingrained challenges that male founders do not, like  the unequal distribution of caregiving and home duties, having access to experienced  female mentors who can share their experiences, offer guidance, support, contacts and  opportunities can be incredibly beneficial. 

Some VC groups and incubators organise events and conferences occasionally that bring  together female founders and other professionals in their industry.

But there is a need for  more consistent (and permanent) platforms for female founders to showcase their ideas and meet with potential investors providing them with more exposure and introduction to  decision makers and funding opportunities. 

Lobbying the government to change policy works. The US model of investing up to 10% of  pension fund money into venture capital since 1979 has funded Google, Apple and  Amazon, propelled innovation towards the market, created a world leading ecosystem and  benefited the entire economy. 

Similarly, changing government policy in Australia would go some way to encourage  investment into more female-focused incubators, which in turn would attract industry-led  mentoring and sponsoring efforts. It is well documented that every government dollar spent  on supporting start-ups attracts many more dollars in private investment. 

VC funds for female founders 

Let’s provide more funding and resources specifically for women-led start-ups to move the  needle on the funding inequity. VC firms such as Scale Ventures and US-based Female Founders’ Fund invest in early-stage start-ups founded by women, money that comes with other benefits like mentorship and resources.

Crowdfunding platform Microwd hosts campaigns specifically for companies founded by women, while Heads Over Heels  connects female founders with potential customers and investors. 

These are great initiatives that have already started to make a difference in the prospects of  some of the female led businesses. But we need more to make a difference. One way to  achieve this would be to require superannuation funds to invest a percentage of their  venture investments into dedicated female lead/female focused funds. This would dovetail nicely into their own ESG policy, but I wager it would also improve return on their  investment. 

Put women in VC decision-making roles

Unconscious bias is a continuing challenge yet to be overcome. Investors often fund start ups run by people who look like them or have similar cultural or ethnic backgrounds. It just  happens that the vast majority of venture capital decision makers are still men. 

Unfortunately, as they are likely to be unaware of their biases, changing them is difficult. 

Education and training might go some way to address this, but the real solution is to  appoint more women at all levels of investment decision making.

There is no reason why  venture partners, investment analysts and investment managers should not be women, other than bias. The talent is certainly there. This is perhaps the most powerful tool in  leveling the playing field for female founders in the long run. 

Close the gender pay gap 

The national gender pay gap, which still sits at 13.3%, is another issue that affects female  founders. When you earn less you are less likely to be able to save up and start your  business. This is exacerbated by the primary caregiving responsibilities, largely affecting  women still.

The Workplace Gender Equality Agency recommends paid parental leave,  flexible working arrangements, inclusive recruitment practice and redesigning part time  management roles as some of the solutions to overcome the gender pay gap.

But more transparency, greater reporting and oversight is required that takes companies beyond  ticking the ESG box. 

As a female-led VC group, Stride Equity will fund businesses that are truly investible, with  founders who will benefit from advice, mentoring, and upskill when needed. I see start-ups  and in my experience many more than 5% of these companies are founded by women. We  are committed to work towards funding ratios that reflect that.