The stats on funding for women-led startups are well-documented and well-discussed.

What’s less understood is the ‘why’ behind them — why they are as they are, and why we’re not seeing any movement. 

On the one hand, we know there are unconscious biases at play, as well as outright discrimination. We know there’s a lack of women in decision-making roles in VC. Some commentators point to a lack of pipeline for women founders or (my personal least favourite), the idea that women are less likely to have the financial literacy required to raise successfully.

The fact is, there is no one thing causing this gap. Indeed, If there was a simple fix, we would have implemented it by now.

There are myriad challenges, some more complex than others, all compounding and exacerbating each other. They exist at every stage of the founder journey, and at almost every touchpoint. They’re pervasive in this ecosystem and outside of it. They’re societal, personal, political.

And they’re ongoing. When a woman founder overcomes one barrier, she’s immediately faced with the next one. Usually, it’s higher.

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Unpacking the challenges

In 2023, ahead of the supposed launch of its Carla Zampatti Fund, Investment NSW brought together the Women’s Entrepreneurship Industry Reference Group (IRG), chaired by Nicola Hazell, to inform the state government’s support for women in business.

Investment NSW commissioned a report to draw on the insights of group members, including founders, investors, community leaders and consultants, to examine the barriers to women and recommend steps to tackle them — in NSW and beyond.

The report pointed to seven “systemic and entrenched” issues in the funding landscape that are each contributing to the gender funding gap:

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1. A dual power imbalance

The investment landscape is still very much dominated by men. This paves the way for unconscious bias favouring male founders (which we will get into later), but it also creates a duality of power imbalances tipped against women.

Any investor holds a certain power over any founder seeking funding. In spaces where women hold little space overall, that imbalance is doubled.

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2. Status quo bias

Because women are under-represented in the ecosystem, when we think about the archetype (dare I say cliche?) of a ‘backable founder’, what comes to mind is a man in a hoodie and sneakers, living off of ramen and working out of his parent’s garage. 

There are precious few women to hold up as examples of what success looks like, so the familiar markers just aren’t there for investors to unconsciously latch onto.

Women pitching women-focused products have another hurdle to overcome, with male VCs struggling to relate to the problem they’re solving, the target market, and the opportunity at hand.

It’s not to say VCs will only back those who fit the gendered stereotypes, or consciously seek them out. Rather, they’re pattern matching, expecting the same characteristics to lead to the same kinds of success.

That means they may view those who don’t match the archetype as being less dedicated, with less appetite for risk. 

“The expectation among investors that founders will take minimal income in their early years of the business, while also investing significant amounts of their own capital into their startup to demonstrate ‘skin in the game’ isn’t realistic for many founders – but particularly women – who need to provide for their families, cover the cost of childcare and schooling, housing and living costs, all while having suffered from the flow-on effects of the gender pay gap.”

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3. Entrenched unconscious bias

The data tells us investors treat women founders differently than men. Women founders tell us the same.

In pitches led by women, investors are more likely to ask questions about the potential for failure, and all the points at which things could go catastrophically wrong. In pitches led by men, they’ll ask about the potential: ‘How big could this be?’.

Investors often seek a certain ‘affinity’ with founders, something they struggle to find in women. And we know women’s caring responsibilities — even the fact they’re of childbearing age — can be considered a ‘risk’.

All of this means women are often directed to women-focused funds, significantly narrowing the pool of capital available to them. This is amplified for Women of Colour, First Nations entrepreneurs, disabled founders, and all other under-represented groups.

The report also pointed to an element of ‘assumed solidarity’, whereby one might expect women investors to be less biased towards women founders. While we know women investors are more likely to support women founders, it’s not always quite that clear-cut.

When women are the minority in the decision-making team, it’s harder for them to make an impact.

“When women are ‘the only’ at the investment table, being a solo voice for women-led ventures can lead to internal challenges, with concerns they will be sidelined as only of value in discussions about women-led ventures … many of these women investors also face bias and discrimination within investment teams where the culture of the many remains male-dominated and ‘blokey’, creating a similar power imbalance for women as partners/investment committee members, as that experienced by women entrepreneurs.”

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4. Discrimination, harassment and abuse

In a small ecosystem with such pronounced power imbalances at play, instances of discrimination, sexual harassment and abuse can go unreported.

Grapevine’s inaugural Harvest report, exploring the experiences of women in tech more broadly, found 30% of incidents of harassment or discrimination went unreported. Of women who did report their experiences, 96% had a negative experience during the process.

The IRG report suggests that founders in particular fear taking action might result in a ‘black mark’ against their name, hurting their business, staff and customers, and making it even harder to raise funding in the future.

As entrepreneurs, women typically don’t have access to structures or procedures for reporting abuse, anyway.

Again, this challenge is amplified for women facing racial discrimination, or those in the LGBTQIA+ community, for example.

Outrageously, according to the report, the very existence of unconscious bias sometimes paves the way for outright discrimination.

“Founder accounts include situations where investors have expressly remarked on their decision not to invest due to their concern that they will have to work harder as an investor to help the founder raise in future rounds.”

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5. Closed networks

Another oft-cited contributor to the funding gap is the fact that women are less likely to have access to the networks necessary for a warm intro. If they do gain access to these male-dominated spaces, they report feeling unwelcome and uncomfortable.

It means women are less likely to organically form relationships with investors, whether they’re currently raising or not.

Women are also less likely to have access to the kinds of wealthy benefactors who might lead a ‘friends and family’ round. Even if they do, they’re less likely to approach them for funding, feeling a social obligation to be responsible, to never over-promise or under-deliver, and to avoid letting anybody down, at all costs.

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6. Lack of transparency

Partly due to existing power imbalances and biases, and partly due to a relative lack of women founders-turned-mentors, there’s a lack of transparency or open data around what a standard term sheet or valuation looks like.

That means women founders, especially first-time founders, don’t always have a clear grasp of what is reasonable and fair in a funding deal. When the aforementioned power balance is tipped against them, they’re in a difficult position to push back.

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7. Burnout, disillusionment and fatigue

Raising capital is difficult for everyone. With all of the above challenges on top, each exacerbating the others, women founders are simply worn down by the mental load and the inevitability of it all.

The obstacles and constant rejection is, understandably, leaving women feeling disillusioned. They’re protecting themselves by staying away from venture capital altogether.

Women who go through the gauntlet, successfully or otherwise, certainly aren’t rushing back to do it again, meaning fewer women fit into the ‘second-time founder’ archetype.

On the one hand, this is an argument for more funding methods that are more accessible to women. On the other, it limits their options and their opportunities for fast growth. 

To be crude, but fair, women are truly sick of this shit.

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Vertical vs horizontal

These systemic challenges don’t exist in isolation. Rather, they stack atop and exacerbate each other, making an already high-pressure experience all the more challenging.

Women who do secure funding receive much less, on average (in 2023, $700,000 for all-women teams, compared to $3 million for all-male teams).

When they go to raise again, they’re expected to have competed on scale and speed, with less than 25% of the fuel.

And that’s before we’ve even considered the broader societal challenges — caring responsibilities and the pay and super gap, for example — facing women everywhere.

Lisa Fedorenko is one of the co-founders of Equity Clear, a collective of Australian investors that invites VC firms and other capital providers to measure and publicly share their diversity metrics.

“There’s a horizontal and a vertical element,” Lisa says.

“Vertically, there are systemic issues that stop women from being in as much of a position to be founders as men. There are structural differences in our society that affect demands on women's time and wealth, disparately to men's,” she explains.

“Horizontally, there are processes that can be improved in every organisation, to make it more equitable.”

Women are not only under-represented in tech and startups, Lisa says. They’ve been absent from systems design throughout the whole of history. Men’s bodies have been the default for everything from healthcare to seatbelt tests, even setting the temperature in the office.

We’re looking at a systemic and historic challenge, so it’s not going to be turned around overnight.

“There are bias elements that need to be addressed, but I don’t think that gets to the root cause of the problem,” she explains.

“The reason this is so pervasive is that there isn’t a band-aid solution. It requires multiple levers moving at the same time, systemically.”

Zarmeen Pavri is managing director at Sustainable Contracting Services, and has had a long career in finance and investment, with a focus on impact and gender equity. She, too, highlights the confluence of challenges facing women seeking funding.

“When investors look at a woman founder, there are many biases applied that manifest into different treatment and actions. For example, the ‘carer penalty’, or the assumption that women might be juggling family and other caring responsibilities,” she says.

“I’ve seen horrible questions asked by investors about long-term commitment. They won’t ask that of a man.

“At the same time, there’s just inadequate support and infrastructure to really tap into innovation and entrepreneurship within the female cohort.”

A few minutes of Googling uncovers various government programs, accelerators and mentorship groups designed to help women tackle some of the major barriers to building and growing a business. In many of them, there is value to be found. But it’s not in dollars and cents.

“Some of these support programs are trying to fix the entrepreneur, rather than addressing the systemic issues that hinder access to funding,” Zarmeen explains.

“In fact, some of them actually reinforce a ‘deficiency’ signal to the marketplace, and merely treat the symptoms of an inadequate system.”

For both Zarmeen and Lisa (and many other women who echo them), it’s clear that there’s no quick fix here.

There are various levers to be pulled at various stages and touchpoints in the ecosystem. To start making meaningful change, we need to pull them all concurrently, with various actors doing their part to shift and transform the funding system.

“Progressive removal of the structural, cultural and relational barriers that prevent women from accessing capital is what is required, and a more holistic approach to addressing the funding gap is needed,” Zarmeen says.

“It starts with that mindset shift. It’s recognising that this is a systemic issue, which requires a move from silo solutions into considering how systems thinking can be applied.

“How can we reshape the system into one that supports, enables and recognises the huge value creation and innovation that women entrepreneurs bring to the table, both for investors and economic growth?”