navigating funding as a female founder
Fern O’Shaughnessy
Associate Director @ Storm3 | Connecting top AI & Data talent with innovative HealthTechs worldwide
A year ago, before I started the Parity newsletter, if you were to ask me to guess what the funding disparity between all male vs all female founding teams, I imagine I would have guessed that all-male teams were 20% more likely to receive funding.
My conversations with C-Suite, VPs, Execs, VCs and senior ICs over the past eight months have drastically changed this view.
It’s not all bad news: 2023 saw the highest percentage of funding going to companies with at least one female founder, increasing from 15% in 2022 to 26% in 2023. It is worth pointing out that, of the $34.7 billion that went into founding teams with at least one female founder, $16.5 billion of it was split between two companies: OpenAI and Anthropic .
Here is a graph that will explain this far better than I ever could, courtesy of Crunchbase :
The above means that 74% of all funding goes to all-male teams.
what does this actually mean for founding teams seeking funding?
At the risk of stating the obvious, this creates a vicious cycle. Male founders are taking a huge risk in including a woman in the founding team. If they want their business to be successful, then by hiring a woman into the founding team they reduce their chances of raising funding. And then, low and behold, less women are a part of founding teams; and then, low and behold, the statistics about women receiving funding remain low.
The irony of writing this article as Flo Health Inc. - a company centered around the tracking of menstrual cycles - becomes the first consumer women's health app to achieve the elusive unicorn status, after their funding was announced yesterday, is not lost on me. While I stand by Flo as an app (it is brilliant), it is male-founded, male-led and invested in by (you guessed it!) male VCs.
"I hope I live to see a day when WOMEN... are trusted with capital more than men to build companies that our very lives depend on."
Jillian Miranda shares her thoughts on this far more eloquently than I ever could, but to quote a section: “Generally, I am of the mind that any win, big or small, in the femtech/women's health ecosystem is a win for us all. This, however, is a major loss for women's health. I really hope I live to see the day when WOMEN are leading the charge for WOMEN'S health. When WOMEN are trusted with capital more than men to build companies that our very lives depend on.”
VCs
It would be too easy and cliché to simply attribute this problem to “the patriarchy” but, as they say, there is no smoke without fire. Women have historically been excluded from finance in the same way they have been excluded from tech; STEM iniatives are still (relatively) new. In 2023, we saw a 1.3% increase of female decision-makers in VCs, as per All Raise 's, an organisation dedicated to encouraging diversity in VCs (well worth looking into), annual report.
There is also an article, admittedly from 2020, here that is interesting.
The lack of diversity within VCs is noticeable from the other side of the table. 97% of female founders agree that there is a significant difference in how male and female founders are treated. Importantly, this difference is connected to who they are pitching to, with 73% of female founders aware of a disparity between female versus male VCs. Pink Salt Ventures conducted a survey on this.
While I won't dig into any of this too deeply, the answer is straightforward: there is not enough women in decision making positions in VCs (this is despite reports that VC management teams composed of women outperform male-only teams ). Women VCs are twice as likely to fund female-led startups compared to male venture capitalists; but even then, when female-founded firms are backed by female investors in their first funding round, they are two times less likely to raise further investment than those backed by male investors. For more reading on this, look here. So even the “women supporting women” mantra can be detrimental on the journey to IPO.
Long story short, however you look at it, and no matter how much I hate writing this down: having a man involved in your early stage startup – whether through the VC or as a founder – increases your chance for not only an initial round, but continued success.
getting funding
Progress does not happen overnight: this will not change immediately, and the battle uphill will be long and slow. But female founders are out there. And they're doing it well. In 2021, April Koh became the youngest woman to run a multi-billion dollar business with Spring Health being valued at over $2 billion.
But even being a trail-blazer comes with a different set of expectations when you are a woman. In 2022, Andreessen Horowitz made shockwaves on LinkedIn when they invested in Adam Neumann's new company, Flow, despite (as Vox called it) "The WeWork mess" - which included insider dealings, burning cash, and reports of poor executive judgement. Neumann ended up being asked to step down by WeWork's VC in 2019, and then went on to receive a16z's biggest investment to date at $350M. Neumann has since tried to acquire WeWork.
Holmes has become the standard against which female founders are judged or, worse, held responsible for.
On the flip side; let's look at Elizabeth Holmes, infamous founder of Theranos. While the situations are different (for one, Holmes served jail time and committed repugnant acts), comparing the way the two have been treated by Silicon Valley is interesting. Where Neumann has been able to walk away from the "the WeWork mess" - and even try to buy the company back under funding from one of the most reputable tech investors out there - Holmes has become the standard against which female founders are judged or, worse, held responsible for.
As with many things, female founders are constantly pitted against each other. Co-Founder of Verge Genomics , Alice Zhang , told 纽约时报 that she was frequently compared to Elizabeth Holmes. The most similar thing about them was that they both ran health-centered startups out of Silicon Valley: “I could see no similarity besides the fact that we’re both women in the hard-science space.”
For more information on the impact of Holmes' case on female founders, there is an interesting article here .
Black and Latinx female founders
All of the above is only taking into account women. It does not acknowledge the differences and challenges that Black women may face, or Latinx women.
Paul Judge , who took over Open Opportunity Fund (a fund dedicated to supporting Black and Latinx founders ) from SoftBank last year, pointed out that: ?“when there’s a downturn funding always goes back to what it always does.”
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When the market experiences turbulence, it is the diversity initiatives that bear the brunt of it.
What he means by this is that funding for Black-founded startups has gone backwards; from 1.4% of all US VC funding in 2021, to 1.1% in 2022, to 0.5% in 2023. When the market experiences turbulence, it is the diversity initiatives that bear the brunt of it.
And this is looking at only Black founders; not taking into account Black women founders. Even if we assume they received half of the funding (which seems unlikely) given to Black founders, then Black women founders would have received only 0.25% of VC funding in 2023.
to conclude
Fundraising as a woman is a test of resilience and determination. Fundraising at the best of times - from my conversations with founders and CEOs of all genders and races - is an uphill battle. It is competitive, draining and requires a lot of hard work and dedication.
What I will say is this: If you are looking for a job, or to invest, it makes sense to look at female founders. They have waded through more (excuse the language) shit, dealt with more setbacks, and had to prove themselves more than any (white) male founder ever will.
links & resources
with all of the above said, I wanted to spotlight some of the incredible organisations and people to follow on the subject:
HearstLab: a pitching event for female founders in the US. You can sign up here – please do so by August 7th!
And also share the articles that helped me to write this article (and some extra ones!):