Women (Especially Founders) Face A 20 Percent Equity Gap At Work
We already know that there is a gender pay gap holding women back at work, but did you know that there is an equity gap too? For every dollar of equity a man holds in a company, women hold 47 cents, according to data of 180,000 employees across 6,000 companies compiled by Carta.
When you get equity at a company, you earn more than a paycheck, you also get a stake in a business that can secure your financial future. Unlike cash, equity is likely to increase in value over time. This is the bet that many early startup employees make: If I work at this new idea and our company gets bought or goes public, I can one day get rich overnight. But women are missing out on this opportunity. The research found that women make up 35 percent of equity-holding employees, but only hold 20 percent of equity. The gap gets more pronounced for female founders. They only own 39 cents for every dollar of equity a male founder earns. In total, women make up 33 percent of employees and founders in the workforce, but only hold 9 percent of equity.
Women only hold 20 percent of the employee equity value.
What happened to all that equity value? In response to the research, the #Angels investment collective of six women suggests that the problem is a combination of factors. For one, female founders are more like to raise money at lower valuations and have to sacrifice a greater proportion of their company to investors, which dilutes their equity value. For another, women are less represented as investors — they make up 9 percent of venture capitalists, one study found — and are more likely to face industry bias overall.
This bias creeps into decision-making. One study on Swedish venture capitalists found that investors would be more likely to question a woman’s entrepreneurship knowledge than a male entrepreneur. Men in business were more likely to get the benefit of the doubt. A male entrepreneur would get described optimistically as “young and promising” while a woman got the tepid response of “young, but experienced.”
For women to get more ownership of the businesses they help build, #Angels suggests that closing the capitalization table gap needs to become a priority for leaders. Their advice to founders and CEOS? Include and develop women from the beginning of a company’s story. “Raise money from women investors. Hire women from day one. Compensate men and women equally when in similar roles. And focus on women of color, especially URMs [underrepresented minorities], in all these areas as they face even higher barriers in our industry,” the group suggests.