Women Founders Increasingly Succeed in Acquiring Venture Capital
Shippo Snippets:
- Shippo salutes Women’s History Month, established in 1987
- The percentage of venture capital deals with companies that include women as founders has doubled in the last decade
- In 2019 alone, $17.2 billion in venture capital had been raised by American-based, female founded startups
- Women control $14 trillion worth of wealth in the U.S.
The Story:
March is Women’s History Month, and we’d like to take time to acknowledge the brave and insightful women through the ages, who forged ahead against all odds.
We also want to salute the women of today who are working to create a new future. Many of them are just starting out as entrepreneurs; others are raising millions of dollars to help other women realize their dreams of owning businesses.
Traditionally, women-owned businesses have received less attention and less funding than male-led startups. Fortunately, that fact is starting to change. Why? Businesses founded by women have been delivering, and are becoming more or more common in terms of VC investments.
The trend seems to be growing strong. The percentage of venture capital deals with companies that include women as founders has doubled in the last decade. According to Pitchbook, deals increased from 7.9% to 15.7% during the time of their study just last year.
Women Founders On the Rise
Yep, there is still a ways to go, but women founders have nevertheless come a long way. Over 11.6 million businesses are owned by women, according to statistics by American Express’ State of Women-Owned Businesses Report (2017). Firms owned by women (51% or more) make up 39% of all privately held companies, contributing 8% of employment and 4.2% of revenues.
We don’t need further proof that it’s still very much a man’s world in terms of this stuff—here is some backup: in the European Union, 92% of funds have been invested in startups founded by males.
Still, steps are moving in the right direction. An explanation for the spike in venture capital for women, according to the research, is the creation of several women-led funds, incubators for female founders, and a higher volume of female-led companies. The results were compiled from deal counts by state, industry and stage.
In 2019 alone, $17.2 billion in venture capital had been raised by American-based, female founded startups. That same year, more female-founded unicorns—which are tech companies passing a $1 billion valuation—were formed than ever before.
As far as female-founded unicorns go, the previous high was 15 in 2018, compared to 21 the following year. That means 14.8% of all unicorns starting up in 2019 were female-led.
Challenges in the Way
Those facing the biggest challenges finding venture capital: black and Latinx women. Black women make up 42% of new businesses owned by women, according to the American Express 2019 State of Women-Owned Businesses. Latinx women represent 31% of new female-owned businesses. That’s almost twice the percentage of their female population (17%). Of women seeking to raise equity financing, only 4% were black and 2% were Latinx, according to research by ProjectDiane. Yet the number of black female-founded startups receiving venture capital increased 2.5 times between 2016 and 2018.
Harlem Capital invests in black-owned ventures and recently announced a $40 million debut fundraise.
“You need diversity funds like ourselves to get this market anywhere close to parity,” Harlem Capital managing partner Jarrid Tingle recently told TechCrunch.
How do female founders measure up to male founders? According to the Ten Year, First Round Project, companies with a female founder performed 63% better than investments with all-male founding teams. In fact, the research indicates that businesses founded by women deliver twice as much per dollar invested than male-founded businesses.
Female-founded venture firms are increasingly starting large funds:
- Mary Meeker raised $1.25B for Bond Capital, her debut fund
- Five years after co-founding Aspect Ventures, Theresia Gouw’s new firm, Acrew Capital, raised $250 million for a new fund
- Alexa von Tobel, founder of LearnVest, and Penny Pritzker, former US Secretary of Commerce and billionaire heiress have raised $200 million for their venture firm Inspired Capital
Here’s one more “big-picture” fact to put women’s venture capital role in perspective: New York Life Investment reports that women control a good amount of wealth in the United States: $14 trillion. They also control 70-80% of all consumer purchases, but they invest 40% less than men.
Three ways women entrepreneurs can approach venture capital opportunities
When positioning yourself for growth, consider these points:
1. Venture capitalists with a track record in funding women-headed ventures
See our list below.
2. Venture capitalists run by family offices
Many affluent families look for meaningful ways to invest that align with their values. They may consider a female-founded venture.
3. Crowdfunding
The JOBS Act, passed in 2012, has made investment crowdfunding a reality for many entrepreneurs who may have otherwise not had access to startup capital. Crowdfunding helps private companies raise funding. Study up on how you can use the regulations to form a company that can access crowd financing.
Female-Founded Venture Capitalist Funds To Know
And with that, best of luck to all hard-working and aspiring women entrepreneurs.
Editor’s note: As March rolls on, we are here to support growing businesses of all stripes. Shippo is fully operational during these challenging times, so please reach out with any questions.
