Road to entrepreneurship getting rockier for female founders seeking capital
Originally published on Austin Business Journal, Nov 17, 2021.
I keep hearing that it’s the best time to raise money as a founder, and in part that’s true. Here in Austin, startups raised $2.4 billion in just the first six months of 2021, already surpassing last year’s record of $2.25 billion. From the outside looking in, things couldn’t be better. But that’s only true if you’re a man.
I’m here to offer a different perspective: that of a woman founder currently raising. As the founder and CEO of Austin-based Radical Girl Gang, the online marketplace to shop women-owned brands, I'm here to share what I’ve experienced on my own fundraising journey. And most importantly, I’m here to be honest about the path forward for women entrepreneurs.
In the last several years, there’s been so much coverage and conversation around the gender gap in funding and very little meaningful action. Last year, only 2.3% of venture capital funding went towards women-led businesses and less than 1% towards women of color. In the first eight months of 2021, funding has dropped even lower to 2.2% — a five-year low. The disturbing reality is that inequity in VC funding is actually increasing, not the opposite.
The pandemic has played a role, causing investors who are already prone to pattern-matching to double down on investments they find less risky. Most often, “less risky” equates to businesses that are familiar and led by men.
I have lived this experience raising my pre-seed round this year, pitching my women-centric marketplace to rooms full of men. With women comprising only 4.9% of VC partners and just 5.6% of VC firms being women-led, this shouldn't surprise us. The vast majority of decision-makers in VC continue to be men and unfortunately, unconscious bias is the rule, not the exception.
Highlighting this is a study by PNAS that found investors prefer pitches by male entrepreneurs compared with pitches by female entrepreneurs, even when the content of the pitch is the exact same. This is all despite the overwhelming amount of evidence that businesses founded by women ultimately deliver higher revenue, despite raising less money.
If there’s one moral of the story here, it’s this: women need to look outside of the VC ecosystem if they want to successfully fund their ventures, especially at an early stage. We must be creative about how and where to raise, explore alternative sources of capital and find ways to circumvent a system that simply wasn’t created to serve us.
I’m not saying that advocating for change in VC doesn’t matter; it absolutely does. But I am saying that women founders shouldn't hold their breath waiting for an invite to the proverbial table that will likely never arrive. We literally don’t have the time to wait for the type of dramatic improvement that would need to happen in VC for the playing field to be truly equitable. We need money to scale our businesses now.
From my vantage point, the future for women founders isn’t venture capital — it’s alternative sources of funding, from crowdfunding and non-dilutive capital to solutions we haven’t yet envisioned. We’re already seeing positive signals with crowdfunding, with campaigns led by women being 32% more likely to reach their funding goals — partly due to reaching a less homogeneous audience. While there isn’t yet a “magic bullet” solution to the funding gap, there is innovation and that gives me hope.
As an entrepreneur, I don’t believe in fixing broken systems; I believe in building new ones. Don’t get me wrong: I want VC to write more checks to women. I desperately want to see women entrepreneurs access the resources they need to scale and reach their potential, especially here in Austin as we’re seeing record amounts of funding. But we shouldn’t hold our breath. We shouldn’t stop building. And we shouldn’t view VC as the only path forward when it’s just one.
Let’s stop telling women that if they hustle harder, the system will work for them. Instead, let’s acknowledge that this system wasn’t created by or for women in the first place — and let’s build new ones that truly serve them.