Businesses need more female investors. Here’s how that can happen.

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According to the US Census Bureau, there are 1.1 million women-owned businesses with employees and 10.5 million women-owned companies without employees. But the more than 11 million women-owned companies accounted for just two percent of venture capital funding in 2021—the lowest percentage since 2016. That amount is actually $6.4 billion, according to Pitchbook, which sounds significant until we look at the total amount of venture capital. (VC) dollars invested by 2021: $330 billion across the US

However, when female founders partnered with male co-founders, those groups received 15.6 percent of VC funding. A sad message for the talented young women coming up in the business world today. Additionally, we know that when an all-male team includes a female, the business is 65 percent more profitable for its investors. It’s hard to explain those two statistics: more women on a team = more investor returns. But with a woman at the helm, the business is not funded. The message here is depressing. It’s fine for women to be on the team doing the work, but not to be the co-founder of the lead? Certainly, from a woman’s point of view, that cannot be true. But could it be true that most investors are men and we are all motivated to back what we know?

Related: Where Are All the Female Investors?

Why do women receive less funding than men?

One theory is that most VC general partners and many angel investors are still men. A very busy woman in the investment world put together this rap comparing angel money to mutual funds. It gives us a glimpse of the different approaches to the two types of investments that a female investor feels most comfortable with. As of 2011 New York TimesAccording to DealBook, at the end of 2019, 12 percent of total partners in VC firms were women, and 740 were female angel investors. Today, women make up 15 percent of total partners at VC firms, and there are now nearly 1,000 female angel investors. Becoming a general partner in a VC firm is a bigger commitment than investing personal dollars into an angel fund, angel network, or company directly through an individual angel investment.

Angel investing has seen more growth in female investors than VC funds, which has influenced the outcomes of female founders. Angel investing’s funding for women is much lower than that of male-led firms, but much higher than that of VCs.

Research shows that women seek angel funding much less often than men, but are equally likely to receive investment. Why did this happen? We can conclude that when approaching angels, female founders find more female investors willing to back them. A little optimistic, angels want to invest in the early stages, so these funds should help move women-owned businesses on the path to higher growth. This could mean more VC dollars in the future, or the real goal, more high-growth women’s exit events.

Related: Meet one of the world’s few self-made female billionaires. She wants to teach you how to play the game — literally.

Another theory is that the types of businesses women are starting may not be the types of businesses that VCs and angels seek funding for. In general, women start local businesses, are part of the community and solve problems that matter to them. Examples might be healthcare, pet care or furniture service industry solutions. In general, men are traditionally biased towards technical and manufacturing, seeing the greater impact of their environment’s ideals. This may be due to previous lifestyles where the man was the breadwinner and the woman had a side gig to bring in extra cash. Certainly, we have outgrown these archaic gender roles.

Women may shy away from this level of funding. Maybe because of the fear of statistics, fear of rejection and lack of time and attention to the development of their business when they are following this financial level. I’ve seen women spend months preparing for a pitch, get bounced in the first round, lose precious time working on her business. I’ve seen women get stabbed and burned by investors because of the problems they face in their businesses. You’ll find questions about the development of men’s screams. In these situations, a woman works on the back foot and has trouble recovering, and her confidence in her business is evident.

However, if a woman decides in this way that she wants to stimulate the development of her business, she should have an equal opportunity to succeed in obtaining capital. And in turn, having the opportunity to call more women would, in theory, improve her chances.

How are female investors unique?

When building a high-growth business team, diversity of mindset, background, race, gender, and experience creates a greater propensity for success. Similarly, having a diversity of investors is an input to the return of the investors and the success of the company’s well-being and growth. Female investors have different perspectives and skill sets, and a female founder may have a better relationship with her business.

Women and men still have very different career preferences and experiences which, combined with their male counterparts, provide a great perspective on a pitching company’s value proposition. Having female investors who can share knowledge and guidance with other female founders improves the success and returns for the investors.

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What might be the impact of more female investors?

According to the numbers, adding more women to the investment pool can only be positive. Whether as an angel with their own funds or as a general partner in a VC firm, the results show that women-founded companies are more successful in securing early- to mid-stage funding. As their businesses grow from early-stage investments, we’re starting to see more female-owned businesses with male founders at the VC table. This is the abundance mentality – the more strong businesses, regardless of the gender of the founder, that get funding, the greater the growth of our economy. And as more women founders see other women getting funded — more of who will enter that billion-dollar club, like Sara Blakely.

Related: Why This VC Is On A Mission To Get More Women Writing Checks For…

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