The problem isn’t women. It’s capital.
In August, Pitchbook reported that 2021 has so far been a surprisingly standout year for women entrepreneurs, with US venture-backed companies with a female founder or co-founder taking in $25.12B in investment in the first half of the year — more than the total amount raised in any prior year.
But there was a catch. The companies that received the majority of that investment were those with mixed-gender male and female co-founding teams. The share of capital raised by women-only founder teams is in fact smaller than it was last year. And to no one’s surprise, the share of total capital raised by either group was dwarfed by the amount of capital raised by male founders, who have received 83% of all deal dollars so far this year.
This isn’t to say that the growing success of male-female cofounder teams shouldn’t be celebrated. They speak to an increasing awareness of the value of gender-balanced teams — as well as, as Pitchbook reports, the higher number of female co-founded companies making later stage, higher value deals, the growing number of women writing checks at VC firms, and burgeoning networks of women entrepreneurs in places like New York City.
But the comparative stagnancy of capital going to women-only teams reveals that the issues that women founders face are clearly not going away — and in some ways, they are getting worse. After years of incremental forward movement, global venture funding to female-founded companies fell significantly in 2020 — from a high of 2.8% of capital deployed in 2019 (hardly an exciting number itself), back down to 2.3% in 2020.
Some of this regression can be attributed to COVID-19. It is well-known that during the pandemic, women have taken on a disproportionate share of increased care responsibilities — and that’s going to hit your company harder if you’re a solo founder than if you’re a co-founder. We also know that companies that were less resourced going into COVID have also been harder hit by the pandemic — and we know that women-led businesses are statistically less resourced.
But the overall lack of forward momentum also speaks to the conscious and unconscious bias that is still in the investment system.
There is still a pervasive belief amongst some investors that the investment gap between male and female entrepreneurs is due to lack of opportunity. That there aren’t enough women starting companies. That the companies women founders are building aren’t investable. That the women-led companies that are investable aren’t progressed enough to receive large amounts of capital. That they don’t know where to find the women entrepreneurs that are out there.
But it’s not women founders that need to change. It’s capital. It’s capital that needs to look beyond its predominantly white and male deal networks to find the diverse and innovative entrepreneurs that are creating the solutions to tomorrow’s challenges. It’s capital that needs to stop asking women entrepreneurs “prevention” questions — focused on security and vigilance — while men get asked “promotion” questions, focused on their hopes, achievements, and ideals. It’s capital that needs to broaden its understanding of what a successful company looks and scales like — and broaden the type of capital it invests to help companies scale.
The good news is that the tools, processes, and vehicles you need to do that exist right now. There are networks in every industry and location to help you find and connect with women entrepreneurs. There are accelerators and incubators working specifically with women founders to help prepare them for investment. There are now more than 300 private market funds investing in women-led and other gender-smart companies — stay tuned for Project Sage 4.0, the survey of private market gender lens funds that I have been doing with Wharton Social Impact since 2017.
It’s great that investors are waking up to the value of mixed gender teams. But let’s be honest: given that this term can include multi-member co-founding teams with a single, sometimes marginalized female co-founder, this is a low bar to clear when it comes to gender inclusion. It’s 2021. It’s well past time to be expanding our pipelines, debiasing our processes, and investing not just in innovative companies that are led by women, but in gender, racial, and other types of diversity writ large.
If you’re not doing this, you’re missing out on key insights from entrepreneurs who understand the full spectrum of human experience — and the market opportunities that come with them.
There is a whole community of people out there who recognize the opportunity, believe the current numbers are unacceptable, and are working to change them. If you’d like to join us, head to gendersmartinvesting.com, where we have a plethora of resources to help you identify investment opportunities, dibias your processes, and invest more inclusively.
And if you’d like to read more of my own insights on the gender-smart investing space, follow me here on Medium, or on Twitter at @zanne2.
