I’ve written about the gender-pay gap in the past where the 2022 data revealed that for every dollar men were paid, women were paid only 82 cents for the same job. Comparing it with the disparity in 2002 when women were paid 80 cents to a dollar, it will take us not a couple of years but a couple of hundred years to close the gap! (Click Gender Pay Gap to read more about it.)
Now, let’s check the gender disparity when it comes to start-up funding, or the Gender Investment Gap. This is a less-known disadvantage women suffer from compared to the well-documented gender-pay gap but the disparity is so much worse. Based on a study by the Boston Consulting Group (BCG), the average investment raised in companies founded and co-founded by women was less than half of what was raised by only male-founded companies! (Click link.)
Now here’s the big irony of this disparity. Despite the funding disadvantage, women-founded businesses generate higher revenues and returns compared to their male counterparts.
Isn’t this crazy?
For sure, this is not a deliberate action to put women entrepreneurs at a disadvantage. It could be a confluence of many things such as:
- Women generally lack the “overconfidence” men exhibit in pitching their projects.
- Some investors may still perceive the women’s role as the homemakers and may worry that raising their children will get in the way of the business.
- Funding decision-makers are still predominantly men, and they are probably looking for someone like them, whether consciously or subconsciously.
On the matter of why women tend to generate more revenues and returns, there could be several reasons; among them are:
- Due to the bias for men in funding, it’s more likely that women entrepreneurs who received funding were measured using a higher bar; therefore, they already have better projects to begin with.
- Women are more open to collaborations and more detailed and micro-oriented which are important in new ventures.
- Women are more loss and risk averse than men in general. This makes them more aware and enables them to better manage such risks.
- Women generally put higher emphasis on internal motivations compared to their male counterparts who are more externally motivated. Internal motivations such as making a difference, helping society solve a problem, etc. give more compelling reasons to persist on projects compared to purely monetary and other external motivations.
- Women come up with ideas that they have experience with; thus, having a greater sense of familiarity with a problem they are trying to solve with their proposed businesses.
There are many more reasons, but the point here is not to make a “men versus women start-up contest.” It is to highlight a not-so talked about gender bias against women entrepreneurs. It is time we give our women entrepreneurs a better chance at making a difference in our society.
Learning from a Pinay Entrepreneur, a NegoSHEnte
A few months ago, I had to opportunity to interview Rhoda Castro Caliwara, the founder and president of Executive Genesis Services, Inc. who is also the president of the Philippine Association of Legitimate Service Contractors (PALSCON). She was also recognized as one of the Inspiring Filipina Entrepreneurs by Go Negosyo in 2022.
In my interview, she shared with us her personal journey and how she became a successful negoSHEnte. It’s a heartwarming narration of her childhood challenges especially when her father met an unfortunate event, leaving her mother to raise her and her siblings by herself. Rhoda also shared how she also became a single parent when her husband died, and of course, her philosophies in live.
We talked about loss aversion and how entrepreneurs should address this human bias. (Click 1, 2, 3, 4 to know more about loss aversion.) And since loss aversion is the central behavioral bias, we paired it off with the central part of our house in our House Tour + Behavioral Biases Series. Watch out for this on Friday.
I hope this article plus our video interview on Friday will convince more women to get into their dream businesses and for investors to deliberately place their bets on women entrepreneurs!
- If you want to know where you are in your FQ journey, take the FQ Test. Click here.
- If you want to know your FQ, buy our books. Click here.
- Gender Pay Gap
- Why women owned start-ups are better https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet
This article is also published in Philstar.