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Venture Capitalism Does Not Wear a Gender Lens: The Lack of Investment Opportunities for Female STEM

Written By: Paula Koller Alonso

Edited By: Nisha Rajoo and Aish Murthy


Men don’t come from Mars, and women don’t come from Venus. If we all stem from the same species, then how come women in STEM are still treated as though they are from another planet?

Every year, 100 million new startups are officially registered across the globe. Out of these, 1.35 million startups are in the STEM (Science, Technology, Engineering and Mathematics) sector. However, while women comprise about 51% of the world’s population, they only account for 14.8% of these startup founders, and just 2% of the 1.35 million STEM startup founders.

On the other side of the coin, currently less than a third (29.3%) of those graduating from STEM-related subjects in higher education are women.

Yet, while inductive reasoning might have worked for Sherlock Holmes, it certainly doesn’t apply when it comes to understanding the complex reasons why women in STEM do not form a significant part of the large number of STEM startups that are founded annually.

Therefore, to find out what is really happening, let’s use Holmes’ enemy - logical deduction - and start with a hypothesis, examine the facts and reach a logical conclusion to try and uncover why there is a severe lack of successful female-founded STEM startups.

Our hypothesis: A lack of venture capitalism into female firms, compounded by complex barriers, hinder more-than-knowledgeable women in the STEM field from successfully founding a startup.

The First Barrier: Venture Capitalism

Let’s start with Venture Capitalism (VC) - the holy grail of making it as a startup. VC is the golden nugget that allows a startup to generate enough investment to hopefully succeed with its entrepreneurial idea. At the very least, it gives enough cash flow to have the opportunity to set off an idea.

In 2018, there was a total of $254 billion invested globally into around 18,000 startups. It’s safe to say that the money is there. It exists, and venture capitalists are excited to invest it into startups, articularly, STEM startups. With the accelerating proliferation of technology, billions of dollars are especially being invested in tech-focused startups.

Yet, despite all this excitement, a disparity exists: 90% of capital raised by tech startups in 2018 went to teams that did not have a single female founder. Zooming out into the general STEM field, VC-backed tech startups with all male-founding teams received 93% of the capital invested, whilst all-women teams received only 2%.

Image courtesy of European Commission

The irony in this severe deficit in female startup investment is that studies have shown that investing in female-led STEM startups actually profits higher returns. Investments in startups with at least one female founder performed 63% better than those with all-male founding teams. Women-founded companies also generate capital that produces a longer-term social impact - more so than male-founded companies.

However, this opportunity has still not been translated into action. And one main reason for this is a little thing called homophily. Homophily, etymologically speaking, comes from the ancient Greek words homós, the “same”, and philía, “love”. In English, we can thus translate it to mean “love of the same”.

What it really means is that the human species has a tendency to feel connected or platonically attracted to what is the same. Studies on homophily have shown that humans tend to socialise and group together with those who are alike to us. But more than that, we also tend to be drawn more to individuals who have similar socio-economic background and demographics to us.

And this is all actually not a coincidence, but a scientific behavioural and social pattern that results in social networks being homogenous with regards to sociodemographic characteristics. And this pattern is not unfamiliar to Venture Capitalism.

Let’s take a moment to look at the socio-demographic makeup of VC firms investing in startups. In the UK, for example, women account for less than 13% of VC decision-makers. In Southeast Asia, only 35% of VC companies have one or more female partners on their investment team. In the US, 65% of VC firms have no female partners.

It seems then, that it is no coincidence that homophily might be playing a role.

Venture capitalists - possibly unintentionally - invest in what they know, connect with, and are attracted to. That is, that which looks and sounds similar to them: men.

Showing the strength and power of homophily, the Harvard Business Review found that VC firms with women partners were twice as likely to invest in women entrepreneurs than men. As a matter of fact, having 10% more women investment partners in VC firms would make investments at the portfolio company level more successful: They end up having a 1.5% higher fund return and see 9.7% more profitable exits.

Thus, a lack of demographic diversity and severe gender imbalances in financial investing results in a dearth of investment opportunities for female-led startups. Combine this scarcity with our hypothesis, and we are one step closer to understanding why the many women who could become STEM entrepreneurs, do not do so.

The 100m Hurdles:

Image courtesy of Getty

Yet, we should not blame it all on the male-dominated financial sector. Imagine the lack of female STEM startup investment as a 100m Hurdle Race at the Olympics. The lack of VC investment can be analogised to the last 3 out of the 10 hurdles in total. There are still 7 other hurdles that female founders have to jump over to even inch closer to the last 30m of the race.

We don’t have time and space in this article to discuss all these 7 hurdles, but we can dissect some of them, which might help us understand why female entrepreneurs in STEM have such a hard time taking their business ideas off the ground.

Gender Biases:

It is no surprise that negative connotations and gender biases still exist towards women entrepreneurs in general. Yet, these are especially prevalent in male-dominated fields such as STEM.

In the European STEM field, fewer than 15% of startup founders are women. It does not seem a coincidence that in that same region, over a third (35%) of Europeans still believe that men are more ambitious than women. In East Asia, only 23% of STEM researchers are women. Meanwhile, 1 in every 5 women has said that gender bias is a reason why they would not consider a career in the STEM field.

These numbers demonstrate that while we are slowly and surely progressing in promoting gender equality, our biases still hold back a lot of women. These biases stem from long-standing (mis)perceptions that a woman’s place is at home, while men belong in the workforce.

Yet, even tradition and history cannot prove that this was and should be, the case. We only have to look at the first computer coders in history, who were women. During World War II, the US government actively encouraged women to join the STEM workforce. 6 women thus ‘laid the groundwork for future programmers and software engineers’.

And women did not start or stop then. Women today have shown that they can do anything that men can do, including working on our mission to get to Mars (which just proves the point that men were certainly not born there!).


Yet, despite these advances, gender biases continue to persist. And it is one of the main hurdles that women have to jump over. This hurdle does not only place gender biases on women trying to become entrepreneurs but also hinders young women from becoming interested in the STEM field in the first place.

However, we are seeing progress made in many countries that are trying to encourage more young women to choose STEM careers, and thus attempting to equalise the current gender imbalance and its biases. Singapore’s educational infrastructure, for example, is globally acclaimed in progressing and encouraging younger students to choose STEM careers.

The government is actively endorsing pursuing an education and career in STEM, especially for young girls, knowing that their overall return on this investment will be worthwhile. For example, it is working together with United Women Singapore, creating a programme for STEM for Girls called Girls2Pioneers.

So, while men might take part in a 100m sprint, in which they still have to qualify to make it to the finals, where they still have to beat the fastest runner, women face hurdles. While metaphorically these are 10 hurdles, in reality, they can definitely be more.

These hurdles not only hinder women from becoming STEM startup founders but actively discourage them. And that is one injustice that not only seems unfair but is robbing the world of brilliant ideas and innovations that could be game-changing.

We need to ensure that no woman ever feels inhibited from making a reality out of her idea. And that starts at the very beginning, with education. We need to encourage young girls to join the STEM field.

And then, we need to support them at every step of the way - this means breaking gender stereotypes, or ensuring that investment boards reflect the diverse make-up of our planet. Only by ensuring this can we pave the way for more women in the STEM field to contribute and change to our already diverse array of startups.

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