Summary
- Underrepresentation of women has significant economic implications for countries.
- There are 4 reasons behind the relatively low number of female tech entrepreneurs.
- WatchMyCompetitor’s co-founder, Amanda Sinclar, reflects on the current situation.
Introduction
Are we making progress in terms of women starting businesses? According to Natwest CEO, Alison Rose, the answer is yes. Her 2022 report paints an optimistic picture regarding female entrepreneurship. The report points out that the growth in women-led start-ups has outstripped men-led start-ups for the first time.
Similar trends can also be observed in other developed countries since the pandemic: It’s estimated that nearly half of new American businesses were founded by women in 2021, up from just a meager 28% in 2019.
But not everything is rosy beneath the surface. The tech industry, long dominated by men, is one of the industries where women have fared less well. Only 28% of tech start-ups in the United States, the country with the leading technology industry, have a female founder. While in the enterprise software sector, the number is even lower, with less than 2% of enterprise software start-ups having a female tech founder.
So why are there relatively fewer female tech entrepreneurs?
Before we examine the reasons, let’s look at the implications of women being underrepresented in the wider economy.
Underrepresentation Of Women Is A Missed Opportunity
“No industry or country can reach its full potential until women reach their full potential. This is especially true of science and technology, where women with a surplus of talent still face a deficit of opportunity” Sheryl Sandberg, former COO of Meta.
The underrepresentation of women has major implications from a global and national perspective. According to the World Bank, providing women worldwide with equal opportunities, across the board, would equate to an additional $172tn gain in global economic output.
For individual countries, the potential benefits are even more remarkable. An earlier 2019 report by Natwest’s Rose estimates that if the UK gender gap was closed, an additional 1.1m women led businesses will be created, Furthermore, an additional £250bn will be added to the UK’s then £2.3tn national economy.
This lost potential can also be observed in the realm of entrepreneurship. Despite receiving less than half of investments enjoyed by male peers, companies founded by women deliver twice as much revenue invested.
It’s clear that if women are given equal opportunities across the board, it’ll deliver significant benefits to countries.
The 4 Reasons Why There So Few Female Tech Entrepreneurs
We know the considerable progress of female entrepreneurship is not being reflected in the tech industry. Although not all the factors below are unique to the tech industry, they are nevertheless important reasons for the relatively low number of female tech entrepreneurs.
1. Cultural factors from a young age
“I think we as a society have done a terrible job of encouraging young girls to engage in STEM at an early age… our actions show that boys grow up to become whatever they want, while girls are encouraged to take “safer” paths”. – Christina Morillo, co-founder of Women Of Color In Tech Chat
Whether it’s in the realm of education, employment and entrepreneurship, women are held back by cultural factors. Starting at an early age, the number of women that enroll into STEM university programmes is relatively low: in general only 15% and 40% STEM subject graduates in the majority of developed nations are women. This in turn limits the pipeline of female talent entering into the tech industry, where women only account for less than a third of the tech workforce.
Cultural considerations are also evident when it comes to entrepreneurship. According to an OECD entrepreneurship survey 52% of women in Europe feared potential business failure, compared to 43% of men. Data by AI Bees also points to a discrepancy in mindset too: 72% of men felt confident about the future of their firm compared to 65% of women. When the question was asked about their overall confidence, men and women responded 65% and 48% respectively.
2. Difficulties accessing funding for business ideas
In 2023 female employees and entrepreneurs are still treated differently. A survey by Women Who Tech revealed that 70% of women in the tech sector feel that they’re treated differently, compared to 11% of men.
Such sentiments are certainly reflected when it comes to aspiring female tech entrepreneurs trying to access investor capital to pursue their business ideas. It’s estimated that women led start-ups receive only less than 2% of total venture capital. In the UK it’s even worse with women led start-ups receiving less than 1%.
Critics will argue that this discrepancy in funding shouldn’t matter. After all, investors are guided by the perceived return on investment, rather than the founders’ gender. In fact 56% of investors genuinely believe they’re meritocratic with their investment decisions.
But the empirical evidence points to major flaws behind this line of reasoning. Research by Boston Consulting Group reveals that women founded companies, despite receiving less investments, deliver twice as much revenue per dollar invested!
The latest surveys regarding investors clearly show that female tech entrepreneurs still face considerable obstacles. Even after overcoming cultural constraints, women face considerably more barriers to begin and scale-up their business. Without major changes in investors’ attitudes towards women-led start-ups, it’ll be difficult even for tech business ideas with great potential to take off.
3. Family commitments and limited financial assistance
Despite clear data showing women’s potential, there’s currently insufficient incentives in place for women to pursue entrepreneurship. The first, and arguably most important factor, are women’s responsibility to their family.
Contrary to popular opinion, the majority of start-up founders are not people in their twenties. In fact the average age of a start-up founder is 35 years old. Among the fastest growing tech start-ups, the average age is around 45 years old.
Only 3% of women start tech companies below the age of 25, whilst 33% begin before the age of 35. This means that the average age when entrepreneurs pursue their business ideas usually coincides with the age when women have the added burden of raising a family and societal expectations to fulfill this role.
Owing to limited government assistance across most developed countries, women are more likely to be alone when pursuing their entrepreneurial endeavors than men. Most women rely on their own savings and family members to start a business, which can radically limit their firm’s potential growth too. Studies in France found that 10% of female entrepreneurs approach banks for support, about one-third fewer than male entrepreneurs.
Until national governments value the contribution of female entrepreneurship with policies, the incentive structure won’t be in place to incentivise the limited pool of women in the tech sector willing to start businesses.
4. Low number of female leaders in tech
A 2022 report by McKinsey shows that women, especially in technical roles, are less likely to be promoted to managerial positions than their male counterparts. Only 52 women were promoted for every 100 men, compared to the overall average of 86 women per 100 men. This means that while women make up 47% of the U.S. workforce, women in tech hold less than 28% of the leadership positions.
Therefore, there’s a structural deficit in the number of women across the hierarchy within tech companies, only to be exacerbated by the low number of entrants mentioned earlier. This is concerning because venture capital firms with a female partner are three times more likely to invest in firms led by a woman.
A higher proportion of female leaders within tech organizations will be needed to create a wider company culture that’s conducive towards reducing the gender gap. This is the first major step towards creating a cycle of greater female participation in the tech sector across the board begets higher numbers of aspiring female tech entrepreneurs.
With greater participation of women within important tech related institutions, only then will the private sector be more receptive to female talent, whether it’s investment firms that supply the capital or companies where future entrepreneurs develop their skill set.
Thoughts From A Female Tech Entrepreneur
Having co-founded WatchMyCompetitor (WMC) in 2015, whilst raising two teenage sons, Amanda Sinclair believes that while changes in government policies and institutional investor attitudes will take time, individuals and companies can take action to address the issue now.
Concerning the cultural constraints and the relatively low number of women in tech, Amanda believes that a STEM background is not a prerequisite. In fact, the industry has a diverse range of roles that can filled by talented applicants without a STEM background and this can increase the pipeline of talent in the industry:
“Having taught technology in girls schools alongside running a small tech business from home whilst my family were young I was struck by the assumption that a career in tech was assumed to be associated with development and coding when in actual fact there are a multitude of roles that we fulfill as an industry each requiring the ability to be creative and think outside the box.
From my experience recruiting candidates, I found competent employees from non-tech backgrounds, across all age groups, to be able to thrive at WMC and beyond. People who are interested in entering into tech shouldn’t be deterred from applying for various non-tech roles and progressing in this fascinating, innovative fast moving industry.”
Which brings us to the role that companies can play. Amanda believes that companies should welcome female talent into the industry. This is an area where WMC has taken a proactive approach. When it comes to recruitment, the company has actively ensured women occupy positions across the business:
We are super proud at WMC of our growing team of women fulfilling such roles across multiple teams and it is a real pleasure to share some of their experiences with our community of how the tech industry appeals to them and the contribution they are making to our business and the tech industry as a whole.”
WMC has made great strides as an organisation in recent years because our recruitment policy aims to tap into the full potential of male and female talent, with the emphasis on recruiting bright, curious people. I hope that this can serve as a great example for peer companies in the industry and hope this will gradually increase the number of aspiring female tech entrepreneurs in the future.
