By gathering survey data from over 280 female founders globally in FLIK’s 2020 report (Q4), it has become more clear what unique challenges female founders have been struggling with during COVID-19 and their hopes for the future.
2020 thus far for female founders has been marked by shrinking financial runways, disappointing and disproportionately less funds, and a lack of resources dedicated to increasing the female founder pipeline.
Based on the findings in the report, female founders are hopeful in the future of female entrepreneurship, but must overcome a lack of network opportunities to investors and mentors, persistent unconscious bias from investors, and a lack of exposure to entrepreneurship early on.
Early predictions on female funding rates
The beginning of 2020 feels like a decade ago for most. But, it’s important for us to remember where female founders stood in the beginning of the year. 2019 proved to be one of the best years for female founder fundraising with $3.3 billion going to all-female founding teams, and yet the total amount of funding going to women still remained a measly 2.8% of all VC funding in the US.
Just as the world of female entrepreneurship was picking up momentum and support, COVID-19 derailed the anticipated growth in the female founder funding rates. In particular, pre-seed and seed stage founders suffered from a lack of fundraising. According to FLIK’s report, only 28% of female founders in both pre-seed and seed stages were able to meet their initial fundraising goal for 2020.
Much of this was due to weak investor relations stemming from a variety of factors. Also in the FLIK report, 23% of respondents were not able to make their fundraising goal. The most voted reason for pre-seed stage companies was a lack of networking opportunities with investors and the most voted reason for seed stage companies was investors backing out due to COVID-19.
When we think about the future of female founders, successfully closing out early rounds of funding is imperative in not only increasing the number of successful female-founded startups, but also in increasing the number of women who find fundraising to be a viable option for their startup. Many founders get their first introductions to VCs through fellow founder networks, so lack of funding and resources could be indicators for a decline in the number of female founders creating capital-backed startups in the future.
Why is it different for female founders?
There are a few factors potentially at play when it comes to the funding rates and difficulties for female founders. For one, investors, like many of the founders, panicked during COVID-19, freezing allocation of investments or backing out of previously agreed upon deals.
Jessica Tan, Investment Associate at 500 Startups, said: “The pandemic has truly magnified the unresolved problem of disproportionate funding into female-founded companies. Many of these factors could be mitigated by having better representation on the investor’s table. We desperately need more women investors to ensure that broader views of the world are represented equally. Investing in female founders should be a strategic move, and not a concession or risk that you take – with or without a pandemic.”
Genevieve Jurvetson, Co-Founder at Fetcher gave her opinion on the matter by saying that “COVID-19 has led to a feast and famine, fear-driven market for capital, where investors may rely more heavily on instinct. We know ‘instinct’ is often colored by implicit biases. These deeply entrenched biases rarely bode well for minority founders [like women]”.
Looking at the US alone, only 4.9% of venture partners identify as women. The resemblance between the number of women in VC and the number of funded female founders is uncanny. Women founders continue to fight through implicit biases and COVID-19 has unfortunately left them in a position where they must actively regain representation in all stages of funding.
Looking to the Future
Understanding that female founders have been disproportionately impacted by the effects of COVID-19, we must now look to the future to see what is necessary in creating a more equitable future for female founders.
In FLIK’s report, 24% of female founder respondents most frequently identified funding especially dedicated to female founders as the best potential resource in creating a more equitable future. While there are notable funds dedicated to female founders like Black Girl Ventures, Female Founders Fund, and more, many of these funds are also women led and are relatively new. In fact, 90% of all womxn-led funds are considered to be emerging managers, meaning that they may not be able to raise as large of funds as established VCs with longer LP relationships. As these managers continue to progress their careers, we may begin to see larger funds dedicated to these founders.
Another key factor to promoting equity would be to expose women to entrepreneurship as early as possible. In times of crisis, the next generation has the perfect opportunity to exercise innovation. 21% of FLIK report respondents identified the need for earlier exposure to entrepreneurship for young women as the most important factor in creating future equity. It’s clear that women founders today struggled to see themselves as entrepreneurs because 75% of women reported that growing up, they did not have role models within the founder community that looked like them.
FLIK believes that increased dedicated funding for female founders will reflect the unique contributions and innovative ventures women founders bring to the world of entrepreneurship. Further, by promoting early introductions to entrepreneurship for young women, more women will see entrepreneurship as a viable career option, increasing representation of women in the space.
Above all, the results of the FLIK report underscore the importance of ongoing diversity, equity and inclusion (DEI) within venture capital, startup accelerator programs, and the global community of female founders. For further details on the FLIK Future of Female Founder report, download the report on the FLIK website.
Michelle Kwok is the CEO & Chief of Community of Female Laboratory of Innovative Knowledge.
Photo by Omar Lopez on Unsplash