(Spoiler: this is bad news)
We live in a world where making money is synonymous with risk. Wall Street is “the Wild West” and 90% of start-ups fail¹.
This fabled façade of testosterone-fuelled risk and peril is what makes the world of business seem inaccessible and closes many doors. One of these doors is female entrepreneurship.
Men still outnumber Women in terms of business ownership at a ratio of 3:1², although that door has been edge open a crack in recent years: the year 2021 saw Women start 49% of new businesses in the US in 2022, a staggering increase from a smaller slice of 28% in 2019 ².
Why then, does only 2.3% of venture capital end up in the pockets of women entrepreneurs³?
THE PROBLEM:
Women struggle to ask for money to fund their budding business.
Women also control 80% of the world’s consumer spending ⁴. Surprising for some, not for others. That means, as a market, Women represent an opportunity bigger than China and India combined ⁴. In other words, Women are spending and handling money like there’s:
a) No men in this world
b) No tomorrow
But when Women need money for their businesses, they freeze. Their voice fades to a murmur and walls are built. Why is it that Women tend to shy away from an investment?
After all, women handle more money daily than our earthly housemates ⁴.
THE CAUSE:
I am going to beat you to it: “women don’t like to take as many risks as men”. That’s why they don’t pursue venture capital or take the leap to start a business from scratch, with all the financial landmines and grenades that are associated.
Wrong.
A new study declares a lack of specific gender patterns in the field of risk-taking behaviour in business. In fact, Women and Men have a highly comparable appetite for risk, when the consequences they will face are the same.
Here’s the catch: the consequences are hardly ever the same.
Women face significantly more negative repercussions, on average, for undergoing the same risks at work than their male colleagues ⁵. Similarly, these same risks deliver fewer rewards for women ⁵.
It’s no wonder then, that women learn through experience to brush up their cost-benefit analysis before jumping off the same metaphorical cliff again. They are less likely to repeat their risk-taking behaviour ⁵ and too right. Why should they pepper their daily routine with risk, when they’re not getting much out of it?
What may appear at first glance to be natural risk aversion, is just the tip of the iceberg. The truth is much darker and systemic. Women are just being smart: learning and adapting in real-time to implicit inequity in the workplace.
Another reason it may seem to be the case that women see risk and run the other way is risk minimization. The common practice of Women diminishing and talking little of the risks they take, only furthers this distorted perception.
Women’s risk-taking becomes invisible, something of a bleak fairytale. Risk-taking may even be invisible to our very own eyes ⁶. The invisibility is exacerbated by Women’s tendency not to pursue the conventionally visible measures of successful risk-taking, such as promotions to high-power positions ⁷.
In fact, how society measures risk is not representative of the two genders.
Risk is typically measured in terms of stereotypically masculine tendencies or traits. How often have you heard someone smugly proclaim that basically, all skydivers are Men? Or that women make up only a fraction of the military?
Extreme alpine sports, skydiving, fighting, driving nonsensically fast cars are all traditionally masculine forms of risk. No one talks about how cheerleading results in more ER visits than American football ⁸.
Did you know being pregnant is about twenty times more likely to result in death than a skydive ⁹.
Let’s talk about the demonization of debt. Far too often, asking for investment is misconstrued as begging, a shameful act. The investor usually gets an exponentially better deal than the entrepreneur, who’s doing the pitching.
Yes, cash is required upfront – usually lots of it - but this is a two-way street and the investor, in fronting the investment, paves a road of reward and riches down the line.
Debt is not the root of all evil – it’s leverage. Debt is not just useful – it’s necessary if we’re talking about long-term success. Anything involving growth demands a form of investment.
Demonising debt does little to encourage innovation or entrepreneurial problem-solving – all of which require stacks.
THE IMPLICATION:
The female tendency to minimise risk has real-life consequences: put simply, self-sabotage. Through habitual downplaying, our actions, achievements, and abilities are equally reduced. Especially, in contrast to Men’s tendency to make their success widely known.
The result? Confidence plummets - and now Women believe they’re not in a state to be taking on risk whatsoever. This destructive cycle only exacerbates the problem.
The double standards regarding access to business opportunities have debilitating implications not only for Women but also for Men.
VC-backed women-led companies outperform companies with all-male founders by 63%, in terms of return of investment. If male-led VC firms lack the fortuity to touch base with the women crunching these numbers, that’s money lost on their part. Stumbling across the right woman-led business could be like buying Tesla or Apple years ago.
THE SOLUTION:
To tackle Women’s artificially curated aversion to risk, initiatives at the workplace have an opportunity to smooth out the playing field when it comes to risk consequences. Rewards as well as penalizations require uniformity across the gender board, and proactively encouraging Women to incorporate healthy risk macros into their diet.
By persisting to actively denounce gender norms and scrapping the idea that women can’t handle risk, we encourage female entrepreneurs to speak up.
Women will feel spoken to by venture capital firms and take these previously stagnant opportunities well within their stride.
After all, there is enough to go around.
At the Global Collective, we offer a space for female CEOs to be heard and male-led investment firms to open their eyes… and wallets. In return, women-led businesses can be collectively catapulted to success and rain returns on all involved.
References
¹Howarth, J. (2023). What Percentage of Start-Ups Fail? 80+ Statistics. https://explodingtopics.com/blog/startup-failure-stats
²Masterson, V. (2022) Here’s What Woman Entrepreneurship looks like around the world. World Economic Forum. SDG:05 Gender Equality.
³Goorha, S. (2021) Overcoming some of the barriers to Women Entrepreneurship. Forbes
⁴Silverstein, M. & Sayre, K. (2009) The Female Economy. Harvard Business Review
⁵Morgenroth, Ryan & Fine (2022). The Gendered Consequences of Risk-Taking at Work: Are Women Averse to Risk or to Poor Consequences? 46:3. https://doi.org/10.1177/03616843221084048
⁶Moreschi, Robert. (2011). An Analysis Of The Ability Of Individuals To Predict Their Own Risk Tolerance. Journal of Business & Economics Research (JBER). 3. 10.19030/jber.v3i2.2744.
⁷Shapiro, M., Ingols, C., O’Neill, R. and Blake-Beard, S. (2009), “Making sense of women as career self-agents: implications for human resource development”, Human Resource Development Quarterly, Vol. 20 No. 4, pp. 477-501.
⁸Cantu, R. & Kucera, K. (2021) Catastrophic Sports Injury Research: 38th Annual Report. National Center for Catastrophic Sports Injury.
⁹Elsesser, K. (2021) Women Aren’t Risk-Averse, They Just Face Consequences When They Take Risks. Forbes.
Comments