Five facts that show we *still* need more female founders & funders
What my co-founder and I learned from attending Seneca VC and Women 2.0’s “Founders + Funders” conference in San Francisco — and an update on our own seed funding round experiences.
It’s widely known that female founders like ourselves have traditionally faced an old boys’ club when it comes to accessing equity investment. Only 2% of venture capital (VC) money went to female founded businesses in the US in 2018. The scariest stat? This was precisely the same figure as the year prior.(Update: See below for an even scarier stat for 2020).
Financial equality is a particularly poignant subject for us given we’re in the fertility sector. When you think about it, parenthood and economics are tightly bound. When, how and how many kids people have nowadays is plainly as much a question of earning power and policy as it is personal preference.
Fortunately, there is a growing group of accomplished female investors in Silicon Valley who are busy connecting with each other and with female founders, with the mission of methodically dismantling the funding glass ceiling.
At Seneca VC and Women 2.0’s “Founders + Funders” event on 31 May 2019 in San Francisco, for instance, we heard from a stellar line-up of influential women (and a few brave men), who had a lot to say on the issue of female funding in the start-up space.
Women 2.0’s Katie Brodock and Seneca VC founder Melissa Moore and partner, Janice Fraser, hosted a who’s who of the Bay area tech scene, including Keith Walton of Plexo Capital and Alexia Bonatsos of Dream Machine and former Executive Editor of TechCrunch, plus a batch of hungry female-led start-ups, like AI for good’s Marvellous.ai and, of course, ELANZA Wellness.
From an AMA session with The Lean Startup founder Eric Ries and Nike Valiant Labs’ Shaherose Charania, to a roundtable discussion on everything from “Getting to Series A” for founders to “Sourcing Dealflow” for funders, our feet didn’t touch the ground.
Here are some of our takeaways from the day, that show there is a definite need for more female founders and funders to connect at well-curated events like this one:
1. Gender stereotypes still exist
Black female founder, Kristina Jones, told the conference a story about VC fundraising alongside her male co-founder.
“We walked in the room and one of the investors asked if I was his secretary,” Jones said. And this was just three months ago.
Often when Jones was pitching her company to a room of mostly male investors, she said they would direct their questions to her male co-founder, even if she was the one doing the talking.
During the networking sessions, other female founders were forthright in sharing their pitching “horror stories” (FYI these are real and verbatim):
“When was the last time you heard of an old, fat woman getting funding? Male investors want you to be young, pretty and thin, so I get lots of Botox and take off my wedding ring.”
“When I was pitching I was told by one investor that I looked like I was about to have babies soon, so I wasn’t a worthwhile investment.”
“The last time I went through a round of funding, one investor found out that I’m a mother of two. I had to convince him that I would basically put them up for adoption if they took my attention away from work.”
So how did Kristina Jones handle her funding round?
“In the end, I started checking to see if there was a female board member at the VC we were scheduled to pitch to,” Jones said. “If there wasn’t, I’d end up saying to my co-founder: you take this one.”
Undeterred, Jones has raised $7.3million for her legal access start-up, CourtBuddy, becoming one of only 14 African American women so far who have raised $1 million or more in venture capital.
And her advice for start-ups trying to fundraise?
- At least one founder should make fundraising their full-time job
- Ask seed investors to help build the Series A list
- Follow up, follow up and follow up!
2. There’s an “Equity Pay Gap,” too
We’ve all heard about the “gender pay gap” (which, according to Pew Research translates to the fact that a woman has to work 39 days extra per year to earn the same as a guy.) And now, thanks to Emily Kramer and her team from Carta, there is tangible evidence of an “equity pay gap”, too.
“Women own just 9% of founder and employee equity,” said Kramer, who had to fit her fact sharing around an audience who could barely stop applauding her research. “Compared to the 91% owned by men.”
Carta’s “The Gap Table” study is a super important piece of research, because in the tech space, salaries are only part of the compensation equation. And in the start-up world, wealth is created primarily through equity ownership. When a startup succeeds, the pay day from equity holdings can be huge, far in advance of salaries.
Not only is redressing the balance important just because it’s the right thing, but also because many key investors/angels/VCs in the valley end up in those roles thanks to exiting a successful start-up. If fewer women are being made wealthy through equity ownership, there are fewer of them becoming the “gate-keepers” of funding for the next generation of start-ups. The investor profile is in danger of remaining uniformly male unless more women are on the road to being wealthy enough to become investors in the first place.
The solution? According to Emily Kramer, start-ups should implement equity bands, like salary bands. This is something Carta has done, along with retro-assigning women and minorities equity to correct the biases they uncovered about their own company from the data.
3. It’s still “who you know” that matters…
One clear consensus came out of the many talks, panels, roundtables and conversations during the “Founders + Funders” conference: personal relationships and networking are critical to getting funding. That’s partly what has perpetuated the boys’ club and why female VCs are countering with events such as this one. In their talks, several of the founders noted that it took around 300 meetings to raise a round of funding, which makes it easy to see how entrepreneurs with the biggest networks are more likely to succeed.
That’s not to say that you should give up now if you didn’t grow up in Palo Alto or don’t already have a solid network. Shruti Gandhi, now General Partner at Array VC and a panel member on the session “The Art of Venture Capital: Picking and Managing Winning Portfolios” said that as an immigrant from India putting herself through college she “had nothing” and knew nobody. Gandhi made the point that if she could use her grit to make a network, “so can you.”
Shout out to The Coven, who presented in the start-up pitch session, for being part of the solution by providing scholarship memberships alongside their paid memberships for women at their co-working spaces in non-coastal, often overlooked cities.
4. The “male founder myth” isn’t dead yet
It probably wasn’t easy treading carefully as one of only a few males at a female-filled event. With the tables turned, there were some notable reactions from the audience to a couple of comments made by male panellists.
When Jake Zeller of AngelList was asked what makes a founder stand out, one of his answers was: “social proof.” To him, he said, an indication of social proof might mean you were previously a top performing engineer at one of the big Silicon Valley tech companies. This comment caused an audible groan from some of the women in the audience. The stereotype of the engineer-turns-founder is problematic for several reasons, chiefly because engineering roles are overwhelmingly filled by men. This restrictive mythology around what makes a founder “investable” — and the belief that there is only one type of successful founder — automatically cuts out many women, not to mention generally suffocating diversity.
Many female founders in the room also outright booed during a panel session called “Angel Investing: 101” when Phin Barnes of First Round Capital suggested that there was so much money in Silicon Valley now that funding is “pretty easy for anyone to get.” Let’s just say from the reaction it was clear that had not been the experience of many of the women in the room.
Despite Barnes and Zeller’s other great contributions to the sessions, these small trigger points couldn’t have emphasised more clearly that biases still exist. People fund what they know. They trust what they understand. Balancing out the funding field with females investors is one way to start tackling this reality and helping make sure the types of products and services that women want to use are brought to fruition, too.
5. Women take a different approach, both as funders and founders
The good news is: the landscape is evolving and there are women-shaped alternatives emerging, to complement the existing funding options.
When Lan Xuezhao, Founder & Managing Partner of Basis Set Ventures, who makes investments in start-ups that range from the hundreds of thousands into the millions, was asked the same question on the panel as AngelList’s Jake Zeller (incidentally, himself a former engineer) about “social proof,” she looked bewildered at the notion that that’s how she would evaluate a potential investment.
“Social proof is just not important to me,” she said.
Not only are female-focused and female-led VCs on the rise (Seneca VC being the obvious example), but there’s a growing spotlight on alternatives that can better suit women’s strengths and business culture.
For example, iFundWomen is a crowdfunding platform for women-led startups and small businesses. Its whirlwind CEO and founder Karen Cahn sat on the panel discussion “Next Generation of Investors: Crowdfunding, Syndicates, and New Ways of Raising Money.” She founded the company after finding herself asking why people weren’t talking about how fantastic crowdfunding can be for early stage founders and why there was no platform built specifically with female founders in mind.
iFundWomen has some key distinctions to a regular crowdfunding platform, in that it has more of a community focus. For instance, it offers coaching to help with pitches and video content and reinvests 20% of the profits from the usage fee from founders running campaigns into campaigns on the platform. Cahn previously worked for big tech companies like Google and AOL and says she was “brainwashed” into thinking raising an equity round immediately was a hallmark of success.
Interestingly, whilst women are under-funded by VCs and angel investors, they outperform when it comes to crowdfunding: female-led campaigns are 9% more successful than those launched by men.
One MASSIVE takeaway from the Founders+Funders events:
There were a slew of amazing tips, insights and introductions throughout the day. But one main shift took place for us: we fundamentally changed how we approached crafting our VC and angel shortlist for our seed round raise.
We made it our mission to take our pitch to as many of the great female funders who are stepping up as we could get in front of. Hearing firsthand stories of institutional biases — many unconscious — made us want to stack the deck in our favour by first reaching out to those investors who not only claimed inclusivity, but had a tangible track record of it.
That meant drafting a spreadsheet of investors who had previously backed female-majority founding teams, were vocal about diversity in venture capital or whose own teams reflected balance.
How are we doing?
It’s tough. Nobody ever said raising venture capital was an easy process and it’s definitely not for the fainthearted.
Here’s the good news: we’ve had an incredibly high response rate even from cold emails. That’s a good start. And it’s possibly down to one of two things; either VCs love our business (let’s hope it’s that one) and/or there’s a growing appetite for change, and investors really are making an effort to hear pitches from more diverse founders. Female Founder Office Hours are a great initiative. We’re the lucky ones who’ve sought funding and got it.
Here’s the bad news: despite unprecedented levels of investment in startups as a whole, a recent Crunchbase report recently revealed a 27% drop in year-on-year global venture capital investment into female founded businesses.
The Crunchbase data show that not only did total funding to female-led startups fall this year, but the proportion of dollars to female-only founders also declined, to 2.3 percent, compared to 2.8 percent in 2019.
There’s no shortage now of VCs that declare diversity. But as a value in name alone words means little. The numbers speak louder, and they don’t add up.
But if there’s one thing successful founders’ stories have revealed, it’s that this is a game of perseverance. She who tries, wins.
The thing is, this is is a cyclical issue. The more we as female founders internalize that reality, the less confidently we enter those meetings. At as any VC will tell you, believing in the team is paramount to them making an investment.
The trouble is, making someone believe in you is really only possible when you are in a situation that allows you to still believe in yourself.
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(Click here for the full list of speakers and conference program for Seneca VC’s Founders + Funders, 31 May 2019.)
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Catherine is Co-founder of ELANZA Wellness, a startup helping clinics deliver better fertility care through its digital fertility coaching platform.
Follow me on Twitter or LinkedIn. Check out the ELANZA website.
