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Venture capital: the biggest gender gap in business

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Of all the risk capital raised in 2018, only 2.2% went to companies led by women

Venture capital: the biggest gender gap in business

The world of business, entrepreneurship, and investment continues to be one of the scenarios in which gender equity is virtually non-existent. Evidence of this is the enormous imbalance that exists between companies founded by men and women and their capacity to raise risk capital.

Leer en español: El capital de riesgo: la brecha de género más grande en los negocios

Of the $130 billion of venture capital invested in 2018 in the United States, only $ 2.88 thousand came to companies founded by women, barely 2.2% of the total, according to data from PitchBook and All Raise. The proportion is alarming and worries more that, according to Fortune, the percentage has been exactly the same as that registered in 2017.

It is called risk capital to all the investments destined to projects in which there is an important element of risk. But in particular, it is used to describe the investment in startups and small businesses in which it is believed that there is a potential for long-term growth.

Venture capital often comes from high profile investors, especially from banks and large private investment funds, and it is important to determine which startups will have the best chances of success and survival.

Also read: How bad is harassment and discrimination faced by female economists?

The figures look even worse in context

Although $ 2.88 billion is a high amount of investment and represents a net increase over the previous year, the fact that 482 teams led by women have received just this compared to the $ 127 billion received by women Teams led by men must be outrageous.

To understand the seriousness of the matter it is important to compare. The Juul electronic cigarette company, founded in 2017 in San Francisco and with a male CEO, raised $ 12.8 billion in venture capital last year, $ 10 billion more than all the companies founded by women together. A single company raised over four times more than the 482 women's companies collected together.

A single investment in a single Latin American venture this year: SoftBank's VisionFund investment in one billion dollars by Colombian company Rappi already represents one-third of what was collected by all companies founded by women in 2018.

An imbalance on both sides of the investment

It is not enough to understand that only 2.2% of venture capital goes to women's companies, to understand the magnitude of the problem we must also see the participation of women within the investment of this capital.

According to Business Insider, only 9% of risk investors are women. Not being this sufficient, according to Wired, between 77 and 79% of risky investment firms have never had a woman represent them on the board of directors of one of the companies in which they invest and more than 75% do not have women in absolute working as risk investors. This is despite the fact that according to a Harvard Business School study, women consistently perform at the same level as men in risky investment companies in which there are at least two women.

 

LatinAmerican Post | Pedro Bernal

Translated from "El capital de riesgo: la brecha de género más grande en los negocios"

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