One way to ensure more VC funding goes to female-founded startups

Has a current or prospective boss ever told you they don’t think you should be promoted because you have children? 

That they can’t imagine you being successful in a role with more work responsibilities due to your caring role at home?

I hope not, because that’s discriminatory and therefore unlawful.

But there is one place where women still hear this regularly and the men who utter such words get away with it. 

It’s as a founder pitching to venture capitalists (VCs) for funding.

In financial year 2022, 0.7% of VC funding in Australia went to solely female-founded businesses. That’s not a typo.

It went down from an already woeful 3.8% in 2017; that’s an 80% decline over five years.

There’s much tut-tutting over these figures in the start-up community. A lot of shaking of heads along with well-intended attempts to dissect the issue and get to the root cause. I think the root cause is obvious.

There are no legal protections against this behaviour

Founders aren’t covered by Fair Work rules when they seek funding.

VCs take significant risk with their money, so they get complete discretion over who they invest in whether it’s discriminatory or not, and without repercussion. It’s a group that actually relies on their biases to spot patterns so they can replicate successful investments. 

There’s no human rights pathway to address gender discrimination experienced when you’re raising funds. 

We are without defence in an industry dominated by wealthy men whose only check on their behaviour is their ethics and peer pressure. In a space with more than its fair share of large egos and cowboys, that’s not effective prevention. 

Without regulation or quotas, this will continue

The problem’s not just that VCs say things like ‘You can’t be an effective CEO with a baby’. 

It’s that the other members of the startup community don’t believe it happens. Or, if they do, they turn a blind eye.

To be clear: everyone believes this discrimination happens in theory. They just don’t believe it when a specific case is brought to their attention.

At a social event at the end of 2021, I was speaking to one of The Guys in Perth’s startup scene. 

Every deal goes through him, he’s got attribution (proof he can pick winning start-ups) and he knows everybody. If you upset him, your name is mud and doors start closing.

I asked him about the specific scenario of a female founder being told she can’t be an effective CEO with a baby when pitching to a male investor. He’d heard about it elsewhere from reliable sources. His response was:

“I know that guy, and I don’t think he’d say that.”

And there you have it, folks. The reason self-regulation will never be enough to see funding representative of women as half the population.

When we bring it up, The Guys effectively call the female founder a liar.

In other words, the man gets the benefit of the doubt. Honour among gentlemen and all that palaver.

What a lost opportunity to be a champion of a female founder. What a wasted chance to positively influence the behaviour of a peer. 

What a bloody disgrace.

But the sad fact is, leaving them to their honour code is like leaving buy now, pay later (BNPL) companies to manage themselves with a self-authored, non-binding code of conduct. 

A lot of people get hurt and eventually, you’ll need to regulate anyway because that’s the only thing that works.

We need quotas … but we won’t get them

Bill Tai, one of the world’s best-known VCs (with a solid record of investing in female-founded startups like Canva and Power Ledger, your Honour) spoke to this at West Tech Fest in Perth in December 2022.

His response to how to get more female founders was not confidence or anything similarly unhelpful. 

While he never said the words ‘quotas’ or ‘regulation’ and yes, he did prevaricate a bit, that’s essentially what he talked about.

Specifically, he said he was surprised to have seen how effective the requirement for certain levels of gender representation in leadership was when listing a public company, and that’s what you’d need to get more female founders.  

(Bill, you have a fan girl for life now.)

The evidence elsewhere is clear. Until you have quotas, things don’t change in a meaningful way because the people who are doing just fine under the current system are the current system.

They won’t fix this until they’re forced to.

However, because of the financial risk involved, I can’t see how discrimination protections for pitching founders would be legislated.

I propose the next best thing.

It’s time for reporting

Imagine if WGEA’s public gender pay gap reporting approach was applied to VCs.

I reckon we need to see two numbers:

1. Percentage of deal flow: the number of female-founded businesses pitching per year versus total number of pitches seen.
2. Percentage of capital invested: how much money went to female-founded businesses per year versus total capital invested. 

Imagine how much time this would save female founders. We’d know which firms not to bother pitching to because they either don’t see many female founders, or if they do, they don’t give them much capital. 

From the investor’s point of view, imagine the benefit to anyone considering contributing capital into those funds. 

If you can see the fund has low female-founded deal flow but you believe female-founded businesses should be part of the portfolio, you could put your money where that aim will more likely be achieved.

Of course, there are already shining beacons of hope among VCs.

If I was seeking capital, I’d pitch to Bill Tai, Derek Gerrard or Andrew Larsen in a heartbeat because they have excellent track records of putting their capital where their mouths are when it comes to supporting female founders.

The list of male VCs I wouldn’t pitch to is much longer, but I’d be delighted to see it shrink. 

To that end, here’s my International Women’s Day wish for 2023:

Ministers, please step up

I’m calling on Industry and Science Minister Ed Husic and Minister for Women Katy Gallagher: we female founders are left out of the gender reforms you’re championing for employees and contractors. 

Though we are few, our potential for positive economic impact is massive if we are well-funded. It’s worth your time and energy to improve the situation if you want to grow the Australian economy.

Please fund someone — anyone — to gather the two data points I mentioned above from Australian VC funds and make them public. 

It doesn’t have to be a compulsory exercise like WGEA gender gap reporting. 

With so many VCs vocally for more female founders, not voluntarily reporting would be inconsistent with industry sentiments. If a fund doesn’t want to share their stats, of course you’d wonder what they have to hide — but that in itself would tell a story. 

What gets measured gets managed, so let’s get some light on these stats.

Lacey Filipich is the founder and director of Money School, a financial educator, international award-winning author, and chemical engineer. 

This article was updated at 2.30pm on Wednesday, February 15, 2023.