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The gender gap in financing of startups and how to close it

Women entrepreneurs face a higher rate of business loan denials and increased interest rates in loans from commercial bankers. We cannot expect the gender funding gap to disappear as women advance in society. Resistance comes from various domains, including politics, culture, and management. By strategically addressing gender inequality as a multifaceted issue, we can get an environment where gender bias is systematically dismantled.

These are conclusions by five scientists presenting an analysis of previous research in Harvard Business Review: Malin Malmström,  professor at Luleå University of Technology; Dean Shepherd, professor at University of Notre Dame and Barbara Burkhard, postdoctoral researcher; Charlotta Sirén, associate professor and Joakim Wincent, professor at the University of St.Gallen.  

“Gender disparities persist in entrepreneurship and statistics reveal the severity of the issue. Globally, only one in three businesses is owned by women. In 2019, the share of startups with at least one female founding member was a mere 20%.”

“In 2019, only 3% of total investment went to all-female businesses, a drop from 4% in 2018. This trend persisted in 2020 with the percentage dropping further to a concerning 2%, a figure that remained unchanged in 2021. The volume of deals involving all-female businesses remained stagnant at 6%.”

The report shows a roughly $1.7 trillion financing gap for women-owned small- and medium-sized enterprises globally

Read Also:  Low VC financing of Europe's women-led startups

“This severe lack of funding poses a substantial threat to the growth, expansion, and overall profitability of women-led businesses.”

The  researcher have identified two key factors that have implications for women in entrepreneurial financing:

  • The political ideology dominating a country and how it influences gender-biased financing conditions.
  • The degree of women’s empowerment, such as women’s participation in high-profile leadership positions, and its effect on gender discrimination in bank financing conditions.

Their three recommendations:

  • Remain vigilant. As more women assume top leadership positions in society, this progress may inadvertently cultivate a belief that gender inequality in funding distribution will resolve itself. Our results warn against such a belief, suggesting a need for continued vigilance. Efforts to combat gender discrimination should be ongoing and multidimensional. 
  • Normalize women’s empowerment. Societies overall may not have reached a “critical mass” of women’s empowerment that is essential for driving gender-equal opportunities. Women who ascend to top leadership roles often navigate within existing patriarchal structures, which potentially limit their role in advocating for gender equality in funding distribution. Even when women are empowered, social gender norms — such as gender role expectations — limit the extent to which they can exercise agency. Continued efforts for normalizing women’s participation in power positions are paramount for achieving gender equality in the distribution of financial resources.


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