I am absolutely delighted to announce the beginning of Launch X, the first immersive program of its kind, that helps female entrepreneurs learn how to raise capital for their businesses. I have gotten a lot of questions of why I started this and what exactly I am hoping to achieve.
First, let’s talk about why.
No one disagrees with the fact that there is a gender problem in the Valley. As shown through research conducted by the Diana Project (a comprehensive study of more than 6k VC funded businesses), only 9% of total VC dollars invested went to companies with women on the executive team in 2011. This number increased dramatically in 2013 to 27%. While the growth is incredible, the percentage of total VC dollars invested in companies with a female CEO has remained static at 2.7%. Why is it so hard for female CEOs to raise money? Unfortunately, there is no proven root cause for the low percentage of VC dollars funding female entrepreneurs. Instead, there are a whole host of theories that contribute to this reality:
1. Fewer women have STEM backgrounds
2. VC firms have few, if any, female partners
3. Women are more risk averse and thus less likely to start companies
4. Women lack the mentorship that leads to better know-how on raising capital and navigating the VC process
The first theory is supported by data. Although women have half the jobs in the US economy, they hold less than 25% of STEM jobs. Additionally, women with a STEM degree are less likely to work in STEM related jobs compared to men with a STEM degree.
The second theory is also supported by data. In 1999, 10% of venture firms had female partners. In 2013, the percentage has decreased to only 6% of venture firms. But do we know that having more women in venture would lead to more female-founded startups? Yes, VC firms with women partners are 2x as likely to invest in companies with women in the executive team and 3x as likely to invest in companies with female founders.
The third theory, while touted most, is often the most refuted. In 1996, Hersch authored a study that found women made safer choices than men re: consumer decisions like seat-belt use and smoking behavior. Zahid Iqbal, in 2006, took a different approach and compared stock trading behavior between male and female executives in response to stock option rewards. Through a more financial perspective than previous studies, he found that male executives are “more risk averse by engaging in higher diversification-related stock sales than the female executives.”
Launch X is tackling the fourth theory. If we believe that more female partners at VC firms, and more women in STEM will lead to more female-funded startups in the long term, what can be done in the short term to make sure the increase in female entrepreneurs can also lead to an increase in funded startups? I believe closing the education and mentorship gap on how to raise capital is the appropriate short term fix. And that is where Launch X comes in…
What is Launch X trying to achieve?
I started Launch X to provide an immersive program that could teach talented female entrepreneurs how to raise capital. As a former investor, I am a strong believer that the best ideas will get funded, but today women and men are not on an equal playing field. Launch X makes sure that female founders are on an equal playing field when it comes to understanding different types of capital, and knowing how to approach and pitch to VCs — information that men often glean from strong mentorship circles with male founders and male VCs. Through the platform of Launch X, we make sure you are connected to VCs and founders who have been through the process and can provide in-depth and customized workshops.
A number of initiatives like women 2.0 have attempted to help female entrepreneurs succeed (See infographic below), but there is still enormous white space between organizations that encourage and support women to start companies and organizations that provide actual capital. This white space must be filled by platforms that teach women how to approach and access the available capital. The hardest bridge to cross is the first seed financing, without which even a great idea can’t become a great company (of course, bootstrapping your company is the most enviable route, but few entrepreneurs have that luxury.)
We are launching our inaugural class of 10 female entrepreneurs at the end of June and can’t wait to share the results. The deadline to apply is on June 15 th2015. Please pass on the message to amazing female entrepreneurs you know.
Note: The research on female founders and their access to capital is still incredibly nascent and there are a lot of angles to explore. The infographic below tries to accumulate some of this data into a “digestable” format. If you have ideas on further questions to explore, please leave a comment. I would love and welcome your help!
Originally published at https://www.tumblr.com on June 11, 2015.