Why is it so hard for female founders to land venture capital?

Blanca Menchaca has had her head down, locked in on her work for years. But a few weeks ago, she paused. The CEO and co-founder of BeMyGuest took a hard look at the environment that exists for companies led by women – and she was shocked.

She hadn’t grasped just how wide the venture capital funding gap is for female-founded startups.

“Looking at the statistics, I was honestly shocked by how little funding female entrepreneurs receive compared to their male counterparts,” Menchaca said. 

And she’s not the only one who felt surprised by the difference.

Menchaca consulted several senior male entrepreneurs she is close to about funding levels who said they were “largely unaware” of the severity of the issue.

Pitchbook recently published charts illustrating just how little venture funding is given to female founders.

This year through October 31, just 6.4% of all deals and 2% of venture capital went to companies founded by women. Yet when women have at least one male co-founder, those figures increase to 18.5% of all deals and 22.7% of all funding.

So why is it so difficult for women leaders to get funding?

There are a number of factors that play into the issue — and a few things that need to change for investor funding distribution to begin to level out in the travel technology space, according to industry experts.

Gender bias, numbers, expectations fuel funding gap

The reasoning behind the funding gap is multifaceted — biases, the number startups founded by women and expectations all play into the problem.

“It’s part of a D, E and I question, right? … It’s really layered,” said Chelsea Salamone, vice president at Thayer Investment Partners.

Menchaca said men she has asked point to gender bias as a key element of the problem — perhaps an “unconscious tendency” to give favor to what is familiar to you or who has been in your network already.

“If decision-makers are predominantly male, this bias can easily play out in funding decisions,” Menchaca said.

Pattern matching is part of the issue, too, according to Nina Kleaveland, founder and CEO of Lanyard and founder of Female Founders in Hospitality, a group providing networking opportunities and resources to female founders building companies in the hospitality sector.

Investors often look to fund entrepreneurs that embody similar characteristics to those they have funded in the past who have been successful.

“That’s essentially just perpetuating the cycle where the same types and profiles of founders are mostly male, then get funded over and over again,” Kleaveland said.

Cara Whitehill, vice president of Thayer Ventures and founder of Unlock Advisors, said investors also want to invest in businesses they can relate to, and when it’s “largely old white guys” investing, they may not relate to what they are hearing pitched by women.

Menchaca agreed and said the issue on the whole is tied to precedents set by society and how that has shaped thought processes.

“There’s also the conscious and unconscious belief, held by both men and women, that women are weaker or that men are inherently stronger,” Menchaca said. “The traditional idea of strength is often tied to a male leadership persona, which society has reinforced for generations.”

With that in mind, she said, it isn’t surprising that biases remain. But change is happening as time goes on. Younger generations, she said, are pushing for a more equal, more inclusive world.

On top of receiving a very low percentage of venture funding in general, women make up a much smaller portion of executives in the travel technology space.

“There’s a lack of pipeline of women in the space,” Salamone said.

“There’s just fewer female founders,” Kleaveland said. “And then, female founders are held to a higher standard. And this has been written about. [I’ve] experienced it. I’ve talked to my community of female founders and hospitality members who have experienced it.”

That means, Kleaveland said, that female founders looking for funding need to have more traction. They need to be able to show more data to support their funding request, have a more detailed marketing strategy — the list goes on.

What needs to change?

While there is no immediate answer on how to close the funding gap, there is work to be done. The first step is raising awareness.

“If I wasn’t aware of how little funding female entrepreneurs receive, it’s likely that not many others are following this issue closely either,” Menchaca said. By talking about it, analyzing it and discussing it openly, we can make this problem visible.”

As society continues to evolve, I’m hopeful that we will move toward a more inclusive and fair environment, one where everyone has an equal chance to succeed.

Blanca Menchaca, BeMyGuest

Once the gap is more widely acknowledged, it becomes more addressable by a collective group.

“I am not comfortable sitting on the sidelines,” Kleaveland said.

She believes a collective effort for change must be made. She specified that support also needs to come from investors.

There needs to be a commitment across the investment community to examine current practices, Kleaveland said. From there, she said there needs to be steps put in place, with benchmarks and metrics, to foster change in investing practices concerning companies founded by females and underrepresented minorities.

Menchaca agreed support is crucial and emphasized it should be used to level the VC playing field.

“I’m not talking about handouts, but rather fair opportunities and recognition based on merit and hard work,” Menchaca said. “I firmly believe that success should be earned, not given. However, when merit alone isn’t enough or when it’s undermined by biases related to gender, race or any other unrelated factor, that’s when we need to make sure that support structures are in place.”

While experts have ideas on ways to work towards closing the funding gap, some things are already changing. Whitehill believes the funding ratio will improve over the next five to 10 years. She pointed to a few factors behind that belief.

More women are starting their own companies. More women are tackling business opportunities that are more general in nature and less “niche,” she said, which should incentivize more funding.

In addition, more women are taking on roles on the funding side.

“More women are entering the VC sector and taking responsibility for investment decisions,” Whitehill said. “When this happens the scope of deal flow expands because of new perspectives, industry experience and networks they are tapped into that complement the existing sources of deal flow from traditional VC teams.”

Menchaca added: “As society continues to evolve, I’m hopeful that we will move toward a more inclusive and fair environment, one where everyone has an equal chance to succeed.”