Part of the challenge in closing the gap is that women struggle to raise capital. In 2016, women received $1.46 billion in venture capital, representing only 2 percent of total venture funding.
The 2017 Harvard Business School working paper, “Diversity in Innovation,” offers one explanation: homophily, meaning that people tend to live and network in homogenous bubbles. So venture capitalists tend to mentor and give money to entrepreneurs who look like them, and since the majority of entrepreneurs are white men, they receive the bulk of the resources—both human and monetary. Homophily also impacts career choices; if girls don’t know or interact with female entrepreneurs, they are less likely to see themselves as one.
As of 2017, women owned 39 percent of all privately held US firms, but those businesses contributed only 8 percent of total employment and 4.2 percent of revenues.
This idea was substantiated by the 2017 Global Entrepreneurship Monitor (GEM) Women’s Report, which found that women’s confidence was lower in countries with more developed economies Fewer than 35 percent of women in these economies believe they have the capabilities to start a business based on the opportunities they see. Conversely, more than 67 percent of women in less-developed economies believe the same thing. The authors of the study acknowledged that businesses in developed economies are more complex, but also noted that only 27 percent of American women say they know an entrepreneur personally.
It’s a vicious cycle, and the only way to break it is to get more women, including women of color and diverse heritages, into the entrepreneurial pipeline. In recent years, there has been a greater emphasis on entrepreneurship programs for women on college campuses. While these efforts are important in working to close the gender gap, the programs may not reach the young women who enter college without an overt interest in entrepreneurship. This matters, because the skills and characteristics that make a good entrepreneur—fortitude, financial literacy, and the ability to set and meet goals, and even take some calculated risks—will serve women well regardless of their chosen field. Moreover, college programs will never reach girls who are not encouraged to pursue higher education. I know this because I was one of those girls.