In the last few years, as corporate and investor focus on diversity, equity, and inclusion (DE&I) has grown, so has the scrutiny around access to capital for diverse founders. Take Serena Williams, who put an exclamation point on it in her August Vogue interview:
“I kind of understood then and there that someone who looks like me needs to start writing the big checks. Sometimes like attracts like. Men are writing those big checks to one another, and in order for us to change that, more people who look like me need to be in that position, giving money back to themselves.”1
To be clear, deal flow for female-founded companies has slowly crept up over the last decade (Display). But the progress barely registers amid the seismic gap: Today, only 2.0% of all US venture funding goes to female founders.2 And the differences don’t end there. Throughout company lifecycles, inequities extend to C-suite and board representation, deal size, and cap tables (which track equity ownership).
The disparities become even more confounding when juxtaposed against data affirming the additive nature of female leadership. Consider McKinsey’s finding that companies with diverse executive teams are 25% more likely to outperform non-diverse companies when it comes to profitability.3
Leveling the Playing Field
What do female founders need to close the gap? Our Women & Wealth podcast has explored the topic extensively—from the lens of founders and investors alike. Through these conversations, as well as discussions with in-house experts, we’ve distilled the answers into two broad themes: community and planning.
Create a Community
We know how important it is to surround yourself with other motivated women “in the room where it happens.” This type of engagement—whether through content, forums, or events designed to foster dialogue, exchange ideas, and educate—helps founders inspire one another and forge meaningful connections. Here are some other tips on community-building from past episodes below:
- The “network effect” is crucial, particularly for women and diverse-led companies. In fact, social capital—in the form of a network you can tap for mentorship, guidance, and coaching—ranks on par with financial and human capital in making your vision a reality. (Creating a Network Effect)
- Female founders also benefit from working together to “send the elevator back down.” Finding a community that espouses a “together we rise” mindset taps success levers that have historically eluded many women entrepreneurs. (“Crowd-Caring”—A New Way to Give)
- From a funding perspective, female investors have a chance to “lift each other up” and “give money back to themselves,” creating a virtuous cycle with their VC dollars. (How Donna Orender Learned to Drown Out the Noise)
- When it comes to startup equity ownership, recognize the “information gap that exists when you’re not part of the majority.” By becoming educated collectively on how equity awards work—and learning to ask for more—we can close this gap and ultimately create more wealth for women. (Why Silicon Valley’s Women Hold Less Start-up Equity)
Community is vital, but women entrepreneurs must also engage in customized planning—especially given longer female lifespans. To make well-informed decisions, have a roadmap. It can be as rudimentary as a basic estate plan or as complex as, say, an optimized exit plan (one that maximizes the dollars in your pocket while fulfilling longer-term legacy and/or charitable planning goals). Check out some other planning takeaways in the podcast episodes below:
- A formalized, well-thought-out exit strategy offers something immensely valuable: control. It covers the structure of the business as well as a potential deal, letting you evaluate all the options and opportunities on the table. An exit plan also ties back to one of our basic mantras: “Know Your Numbers.” That means quantifying spending so you can ultimately determine what you’ll need to sustain your lifestyle for a lifetime. (Why Every Female Founder Needs an Exit Plan; Five Things Female Investors Need to Know)
- Many women grapple with how best to take care of those around them and contribute to the causes that matter most. Think through your priorities. Where do your future legacy, lifestyle, or desire to make an impact rank? Reflecting on closely held values is a vital step—not only in passing on future wealth and knowledge but in using your business to give back. Philanthropy often makes the best bridge between generations to transmit values and educate heirs. (The Ties that Bind: How One Family Business Defied the Odds)
Advice is the glue that sits at the intersection of these two essential components.
Obtaining the necessary support, strategic advice, and education is one of the most important aspects of being a successful entrepreneur. That can come in the form of “building a dream team” of trusted advisors (i.e., financial advisor, tax professional, attorney) or a peer network and personal board (Nicole Ledoux and the Seeds of Entrepreneurship). Look for professionals who will truly listen and serve as a resource to propel your business to the next level. With these keys to success, we can continue improving the statistics for female founders everywhere.
- Beata Kirr
- Co-Head—Investment & Wealth Strategies
- Elizabeth Sohmer, CFA
- Associate Director—Institute for Executives and Business Owners
3 McKinsey & Company, “Diversity Wins: How inclusion matters” (May 2020)