If two people started the same type of business in similar ways, yet only one of those founders received $100,000 in funding, would that be fair? What if the only difference between those two entrepreneurs was gender?
Unfortunately, that hypothetical question is reality, according to 99designs' recent Women in Business 2018 study. Based on answers from over 3,000 entrepreneurs, 99designs found that despite being equal in passion, drive, and work ethic, women were nearly half as likely to raise $100,000 in funding than their male counterparts.
The passion
Perhaps most confusing is that female entrepreneurs reported a work ethic that seemed to surpass their male counterparts. Women were more likely to report putting in a second shift after hours (67% of women vs 61% of men) and running their businesses from home (68% of women vs 48% of men). Women were also more likely to have started a business after the age of 35.
When asked why they started a business, the women 99designs surveyed were more likely to list reasons more closely related to passion for their work, including, "I have an expertise in the area." Men, on the other hand, were more likely to state that they started a business because they "always wanted to be an entrepreneur."
The cost
Unfortunately, this lack of access to funding could have a direct impact on many women-run businesses and their ability to move beyond the startup phase. Not only do more women work from home, but they're also less likely to hire additional employees early on. In fact, men are twice as likely to have two or more employees working for their startup than women (53% of men vs 32% of women).
If women lack the funding necessary to rent office space, hire new employees, or invest in marketing to reach new clients, they could find growth of their businesses stagnate.
The commonalities
In all other areas, though, 99designs' data shows male- and female-led businesses operate similarly. With the rare exception, both genders are likely to start businesses in the same industries, although women are more likely to choose healthcare or design, while men more often opt for tech-oriented enterprises. Both men and women also seem to approach fundraising in similar manners, listing challenges like "inexperience" and motivations like "retaining independence." Both genders also listed friends and family as their top funding source.
The reasoning
So why the disparity in funding? There could be many reasons. One possible reason lies in the wording used to describe male vs. female entrepreneurs by venture capitalists in the boardroom and behind closed doors. Female entrepreneurs have been found to be referred to by VCs as weak, worried, or too cautious, while men are described as arrogant, aggressive, or very driven. Investors also tend to bias the questions asked when interviewing male entrepreneurs vs. their female counterparts. Men are often asked questions that are promotion-oriented (hopes and ideals), while women are asked prevention-oriented (safety and security) questions.
The good news
Perhaps the best news coming out of the study comes from comparing this year's results to last year's. Last year, 99designs found that 12 percent of men surveyed had raised more than $100,000 in funding, compared to only 5 percent of women surveyed. This year, 28 percent of men report raising $100,000 or more, and 15 percent of women had achieved that goal. Unfortunately, though, the same gap hasn't narrowed by much, with men still nearly two times more likely to raise six-figure funding than women.
The impact
When women are denied the funding they need, it actually affects the economy as a whole. One UK-based study found that by boosting female entrepreneurship, the UK economy would see an increase of as much as £180 billion ($250 million in US dollars). American studies have found that women-led companies perform far better than those headed up by men and they also bring 60 percent more value to the investors who believe in them. There also continues to be a pay gap between men and women, and providing equal funding could be a great way to start to change those numbers.
The first step toward remedying the gender funding disparity is to be aware that it's taking place. The realities of investing in female-led ventures seem to vary dramatically from what investors seem to believe. As investors prepare for another decade of investing, it's important to continue to watch these numbers and make a concerted effort toward offering equal funding for equal businesses.
Author bio: Laura heads up the European Marketing team for 99designs in Berlin. Having studied History of Art in the UK's capital city, she is passionate about the visual arts, design and aesthetics, and has over a decade of digital marketing experience behind her. When she's not championing the 99designs brand you'll likely find her hanging out with friends, family or co-workers across continents, practicing yoga or soaking up her favourite music around the city of Berlin.
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