Outside the Box: Investors are the biggest losers when women and minority entrepreneurs don’t get startup money

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I saw myself as a technologist, like so many in Silicon Valley. I believed that with a good idea for a product and enough gumption, I could make anything happen for my business. I had earned a certain amount of micro-celebrity from my days at “Jack and Jill Politics” (a popular blog at the time) and from the company I co-founded, Fission Strategy, which was earning millions of dollars in revenue. 

So when my business partner, Roz Lemieux, and I sought funding to take our new product, Attentive.ly, from side hustle to main gig, I could never have foreseen the road blocks we’d run into as two female entrepreneurs.

The meetings with potential investors would typically go something like this: We’d sit down with an angel investor who would listen to our demo politely and at the end say something along the lines of, “I can definitely see where this product could make a difference, but I just don’t know if you are the person who can actually take it to market.”

I knew that I had as good of a track record as anybody walking into those meetings. We had a good product and paying customers. Yet here I was consistently being told it was a good idea but that there was a problem with me. The clear, explicit statement was that if someone else had brought it in, it would be worth it. Attentive.ly ultimately found seed-stage startup capital from two angel investors and secured future rounds of angel investment.

As a woman, I can attest to the fact that we experience different challenges in society than men, and one place it shows up is how we are perceived in business. Investors will make snap judgments — unconscious or not — about you while you’re sitting in front of them. 

The fact that Bee Shapiro, founder of fragrance company Ellis Brooklyn, experienced difficulty seeking funding whenever she wore her wedding ring is a prime example of how these snap judgments disproportionately affect women. 

Shapiro was frequently asked, “How are you going to balance your personal and professional life?” One day, before going to an important investor meeting, she forgot to put on her wedding ring. That question never came up. So Shapiro stopped wearing it to take the question off the table, as it had become a clear distraction. I doubt male entrepreneurs often have their pitches questioned and derailed over a piece of jewelry they choose whether or not to wear.

Representation matters

Now you may be asking yourself, “Why in this day and age is it still so difficult to secure funding as a woman, and even harder to do as a woman of color?” The answer comes down to one word: representation. 

Without female and minority representation at the top to act as advocates, it’s almost impossible for those seeking funding to get their foot in the door. 

In 2017, 98% of venture capitalist money went to men, the vast majority of whom were white. Considering that the National Venture Capital Association reports that 89% of partners at venture capital firms are men who are predominantly white, I can’t say I’m surprised. People tend to stick with what they know. Without female and minority representation at the top to act as advocates, it’s almost impossible for those seeking funding to get their foot in the door. 

Read: Women-owned businesses face a lack of funding — and here’s how to change this

The fact of the matter is that less than 10% of venture-backed companies have a female leader. As one of those 10%, knowing how hard I fought tooth-and-nail to get here, I have one thing to say to VCs: The lack of women and minority representation affects you too

Here’s why: Look at who ultimately loses when we don’t invest in diversity. Gender-diverse companies are 21% more likely to outperform their peers; ethnically diverse companies outperform non-diverse groups by 35%, and inclusive companies are 1.7 times more likely to be innovation leaders in their market. Moreover, through personal experience, women and people of color naturally identify markets and profit streams that would otherwise be unseen and untapped. 

Read: How to create more female corporate leaders

More: The shocking profession with the biggest gender wage gap

We clearly still have a long way to go, but thankfully people are beginning to rise to the challenge by acting as resources and sounding boards for VCs who want to learn more about inclusivity and female and minority entrepreneurs seeking advice. 

Whenever I see companies that walk the walk when it comes to equal representation and diversity, I feel the need to spread the word. One such company is SOCAP (Social Capital Markets), which convenes an annual social impact conference for male an d female entrepreneurs and investors from all walks of life. What’s particularly encouraging about the SOCAP conference and similar gatherings is that they give female social entrepreneurs, founders, investors, and business owners an opportunity to share wisdom, connect around best practices, and explore what happens when women take charge.

Cheryl Contee is CEO and co-founder of Do Big Things, a digital agency focused on causes and campaigns, and author of Mechanical Bull: How You Can Achieve Startup Success.. She was a co-founder of social marketing software Attentive.ly. Her prior company Fission Strategy helped write early source code for Crowdtangle. Contee is a co-founder of the tech inclusion initiative #YesWeCode.

On October 22 in San Francisco, Contee will be a panelist at When Women Lead: A World Changing Women Workshop.

Read: This is what it would take to close the gender pay gap

More:   Why are just 12% of inventors with a U.S. patent women?