Private Equity Has Trillions. Why Do Women Get So Little of It?

By now, we all know that equal pay has become a huge issue in our society. It’s even affected the sports world, where female soccer players are fighting for their rightful piece of the pie. But, somehow, this attention to equal pay becomes lost when it comes to the upper echelons of private equity. As it turns out, the situation is even direr than what it may seem when one considers the fact that women in the business world make 80.7 cents for every dollar a man makes working the same position.

Astounding Statistics Slated Against Women

One area that doesn’t receive enough attention in the world of private equity. Perhaps this is because it’s not as relatable to so many people. Many can relate to the idea of working in an office and discovering that a male colleague is earning more, as this is an everyday event in our culture. However, not everybody can understand what it’s like to be a person with a business idea, who is tasked with running around and shopping their concepts to someone who might be able to fund them. With an eye-popping $3 trillion worth of equity floating around, one would think that half of that equity would be allocated towards ventures founded by women. However, this is not the case. And the real statistics are nothing less than startling; only seven percent of equity and VC funds are invested in businesses commanded by women. When one examines strictly the VC stats, the numbers are even grimmer. In 2018, only 2.2% of resources were awarded to female founders.

Asking the Hard Questions

With the reality of the landscape this stark, it would seem that we need to start asking ourselves important questions about how and why this atrocious inequality occurs. Because the vast majority of private equity firms and venture capital firms are run by men, perhaps they have an easier time relating to other men. Additionally, sometimes they just don’t understand the concepts that women are proposing or can’t comprehend how they would work in the real world. We’ve seen this several times with when women founders discuss their experiences of trying to get their ideas off the ground.

Jennifer Hyman’s Experience Founding Rent the Runway

Widely credited with disrupting the worlds of fashion and technology with her brainchild Rent the Runway, Jennifer Hyman has been extremely vocal about what it’s like to be a woman working in what is essentially a man’s world. She attributes her massive success to what seems to be almost a perfect storm of events, a confluence of qualities that marked her for success early on. While many other “self-made” women such as cosmetics giant Kylie Jenner profess that they alone are responsible for their success, Hyman openly discusses how her supportive family structure allowed her to pursue higher education goals that helped her to achieve success. She also talks about how her likeability inspired others to want to assist her in her early career. However, Hyman is also very open about the downside of being a woman in tech. What, if for instance, she wasn’t likable? One doesn’t really need to be likable in order to have a great idea. But in order to fund that great idea, women find themselves coming up against barriers that most men won’t ever face.

Putting the Closet in the Cloud

Indeed, it seems difficult to envision a man having the same type of revelation that Hyman did when it came to creating Rent the Runway. Mulling over her sister’s decision to purchase a gown that put her into credit card debt, Hyman envisioned a new company that would allow women to order clothes as they needed. After all, in a world that has become awash in a social media frenzy, many women don’t want to be photographed in the same dress twice. Hyman suddenly got a brainstorm for a business that would allow women to keep their closets uncluttered — and their bodies bedazzled with new designer dresses. Obviously, it is practically impossible to imagine a man having a similar revelation. But the fact that Hyman was able to successfully raise money for her project means that she succeeded against overwhelming odds. One has to wonder how many other women are out there, toiling away with a great idea and unable to execute it because no one is willing to invest.

When Female Founders Have to Circumvent The System

For Spanx founder Sarah Blakely, starting her revolutionary line was anything but easy. After brainstorming the idea, she went to North Carolina to try to convince hosiery mills to help her. These mills were dominated by men who didn’t see the value in hosiery that shaped and sculpted a woman’s body to her preference. Eventually, though, one man did see the value in Blakely’s unique proposition. After proposing the concept of Spanx to his daughters, who loved the idea, he then reached out to the young entrepreneur to do some business with her. Later on, Blakely would recount how strange it was to realize that the hosiery sector is dominated by men who do not use the product.

Pulling Herself Up by the Bootstraps

Since Blakely didn’t have anyone backing her, she needed to be creative about financing her new endeavor. After the line was picked up by Neiman Marcus and a few other upscale retail shops, Blakely sent the product to Oprah Winfrey. After that, it wasn’t long before Oprah was touting the shapewear as one of her favorite new products. Eventually, Blakely was finally able to quit her day job of selling fax machines. It sounds incredible that Blakely would have to be stretched this thin, but she still needed to support herself while pursuing her dreams of making Spanx a ubiquitous item for every woman. All along the way, it probably would have been easy for her to quit. Working one high-pressure job while pursuing lofty business goals undoubtedly caused a great deal of stress in her life. Through Blakely’s story, it’s easy to see how difficult it can be to get ahead when you can’t even get into the room with financial backers, let alone impress them during a meeting.

Why the Oprah Part of the Story Is So Integral

Because she is a woman herself, Oprah saw value in Spanx. If Blakely had sent the undergarments to a male talk show host, for instance, it is highly doubtful that she would have gotten anywhere with it. But Oprah is an entity unto herself, and she was able to bring a great deal of public awareness to Blakely’s doorstep. Because Oprah is in such a powerful position, she was able to share some of her spotlight with Sara. Because women are so often not in high positions like this, they rarely have the chance to provide opportunities to other women.

Struggling with Biases

For female entrepreneurs, it’s not rare to hide a marriage or budding pregnancy when trying to secure capital. This is because of men in these meetings, who often harbor unconscious expectations about women. They might think that having a child would render a woman unable to carry out all of her work duties. Because woman deal with these unreasonable biases, it’s easy to see why so many are willing to go to great lengths to conceal anything that might prevent them from securing funding. The limited amount of research we have indicates that women are even asked different questions when they go into meetings with investors. While men are asked about their overarching goals and dreams for the fledgling business, women are pummeled with inquiries about risk assessment. Right from the get-go, this puts women on the offensive. Instead of promoting their dreams, they are forced to defend them from a firing squad.

Men and Women’s Views on Gender Diversity Vary Sharply

When people in the private equity and VC sectors are questioned about why such an outrageous disparity exists, they are not able to come to a consensus. Women cite biases surrounding hiring and recruitment for the decisionmakers who will be analyzing their businesses. They also point to a lack of prioritization. Many companies just choose not to concern themselves with low numbers. They might hold seminars about inclusiveness and attend retreats to improve their business practices, but at the end of the day, no real progress seems to be made. Women feel excluded, and many of the men in these powerful positions seem oblivious to the causes. For instance, some claim that there is a lack of female talent out there, while women feel quite the opposite.

What Needs to Change?

Real and meaningful transformation still feels as if it is a long way off, even in 2019. These days, it seems as if successful women are going to have to give a leg up to others who are pursuing their dreams. Jennifer Hyman, for instance, works on an initiative called Project Entrepreneur. Attracting diverse female talent from across the spectrum, this group strives to empower women and give them the tools necessary to thrive in today’s male-dominated business environment. Sara Blakely has also invested a great deal of time and energy into helping other female entrepreneurs. One positive aspect of the internet revolution is that women can now find at least some guidance online. If they are looking for a mentor or chasing inspiration, it’s just a click away. The issues of fundraising have become so much more obvious in the age of social media, and awareness is more important than ever.