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Women still have a venture capital problem

Monday, August 30, 2021 8:00 AM | Anonymous

Women-led startups received just 2.3% of VC funding in 2020, and that’s a problem not just for female founders, but for the U.S. economy as a whole. Here’s what investors can—and should—do about it.

I had an interesting experience during our recent fundraise when a male VC friend remarked that our team should consider changing the name of the fund. “Your returns are great,” he said, “but funding only women-led companies is a hard sell to institutional investors.”

His comment encapsulated exactly what continues to be the most significant hurdle for female entrepreneurs today. Many investors view female-founded companies as “impact investments,” versus an opportunity to generate alpha returns—or excess returns earned on an investment above the benchmark return—within an asset class that has been historically under-appreciated.

Over the past 12 months, we’ve seen incredible momentum from a diverse cohort of growth-stage female-founded companies for the first time in history. This February, 31-year-old Bumble CEO Whitney Wolfe Herd took her company public and become the 22nd woman ever to do so. She created a different role model of success in bright yellow, holding her one-year-old son as she rang the NASDAQ bell. In May, FIGS became the first company to go public led by two female co-founders in the healthcare apparel space. A month later, in June, Anne Wojcicki led genetic testing company 23&Me’s public offering that valued the company at $3.5 billion. Just this August, Hello Sunshine, a female-founded media company building content specifically for female audiences, was acquired for an estimated $900 million, and Maven Clinic, the largest virtual clinic for womens’ and family care was valued at $1B. These companies vary by sector, founder experience, and focus, and demonstrate that we’re on the cusp of a real inflection point. The opportunity is apparent that there’s real money to be made investing in women, yet investors themselves have not caught up.

Despite these examples of success, we continue to see women face many of the same challenges when it comes to actually raise capital. Women-led startups received just 2.3% of VC funding in 2020. To put that in absolute terms, that 2.3% breaks down to roughly $3.7 billion going towards women, as opposed to the $160 billion that male founders receive. In today’s day and age, this is archaic. We know diversity matters, and that diverse perspectives generate more favorable outcomes. And while organizations have spoken quite loudly about their commitments to inclusivity, the dollars have not been put to work.

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