Venture capital funding in female-founded or female-led startups in the US was down 31% in the first three quarters of 2020. A stark change in trajectory given VC funding in female-founded teams reached an all-time high in 2019, accounting for 2.8% (yes, you read that right) of capital across the entire US startup ecosystem. Unfortunately, the story is much the same here in Canada.
When COVID-19 hit, my team at Shift and I had been gearing up for our Series A. As for many other businesses, the global pandemic had other plans for us – and so we made the decision to postpone our funding plans to a later date, and we were fortunate to have the flexibility and runway to do so.
Roughly one year later the state of VC funding in women-led businesses in Canada still looks dismal – a pill made harder to swallow now that we know women have also been disproportionately affected by COVID-19. With that said, the pandemic has provided some valuable lessons that women business leaders can use to get ahead when it comes to securing financing, whether in 2021 or in the years that follow. Here’s my take on how COVID-19 impacted women’s plans and approaches to VC funding, and what needs to be done to level the playing field.
A shift in priorities
2020 was the year of ‘pivots’. With our plans for funding on pause, the silver lining for Shift was that we regained some time to reflect on our priorities and consider how we could leverage the capital we already had to provide even more value to our customers, with special attention to many people’s new reality of working from home.
Especially in the tech industry, many companies used this time to double down on product development – optimizing, or in some unique cases, completely overhauling their offering to provide more value to their customers now, and for a post-pandemic world. Just as Shopify’s Harley Finkelstein always says, entrepreneurship isn’t an overnight success – companies need to embody a certain level of commitment to ongoing betterment and re-evaluation. Tech and product features, like Workspaces, emerged to support newly remote workforces and to make sure people could continue to carry out their work, with their teams, from anywhere.
With exceptional focus on refining our product, we were also able to turn the corner on profitability. From a funding perspective, this has allowed us to regroup on our longer-term strategy, and accelerate growth in the right business areas to ensure we are well positioned when we hit the ‘resume’ button on our Series A.
More broadly, the events of 2020 reinvigorated the ‘why’ behind many businesses, their greater purposes, and the markets that they serve. It’s this macro-perspective that more and more business leaders have tapped into over the last year, using it as their ‘North Star’ to navigate this tricky time.
COVID-19’s impact on how women seek VC funding
The pandemic’s most obvious impact on VC investment in women-led businesses has been on the availability of opportunities. Just as we rethought pursuing a funding round in the midst of a global pandemic, our VC counterparts were also reassessing their next steps.
We were reminded to slow down – to take a beat and take stock of what our priority items were, rather than rush into another financing round, simply because ‘lightning speed’ is the traditional pace at which tech companies have felt they need to scale.
Last year emphasized a need to stay nimble and, if possible, have some capital on hand in the event of unforeseen circumstances. It’s reminded businesses around the world that there are larger forces at play beyond our control – the only things we can manipulate are our businesses’ operations, and the wellbeing of our people.
Regardless of your position in the industry, there are ways that each of us can do our part to help uplift women-led businesses and female entrepreneurs in our communities.
There are several programs in Canada that are focused on increasing the amount of VC investment that goes towards women-led companies, as well as empowering women to step into investor positions themselves. Some examples are the BDC Capital Women in Technology Venture Fund, Women’s Equity Lab (which provides an entry point for women to engage in early-stage investing), and The51 (which is democratizing women-led capital for women-led businesses). This is just the first of many steps we can take towards levelling the playing field, normalizing women in VC and in tech, and eradicating the systemic bias that currently exists.
For working professionals, and those in leadership positions, don’t downplay the importance of mentorship. Look to mentor and be mentored by diverse people. This isn’t just good for society, it’s also good for business.
On a broader level, all of us should continue to educate ourselves about gender inequality, as well as the imbalance seen when it comes to funding. This is not a women’s issue, it’s a human issue. Take a moment to question your own biases and assumptions, and begin the process of ‘unlearning.’ Reflect on the gaps that may be present in your own personal life and throughout your network. Take stock of the moments when women and other minority groups have not been invited into the room – whether an actual room, a Zoom room, your investor circle, or the Clubhouse room.
With increased awareness and education comes greater confidence to be a voice for women globally, and the opportunity to achieve equity.