- 04.07.14
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[Photo: Reinhard Hunger for Fast Company]
The Truth About Women And Funding: What It’s Really Like And Where Do We Go From Here?
Join Leadership editor Kathleen Davis with Anu Duggal, the founder of FCubed (Female Founders Fund) and Kathryn Tucker, CEO and founder of RedRover, on Friday, March 6th at 11 a.m. ET for a discussion about the state of funding women-led startups.
Photo: Oleg Golovnev via Shutterstock
The statistics paint a clear and discouraging picture. Women-owned businesses are growing faster than the national average and women-led, venture-backed companies bring in more revenue than male-led companies on average, yet women entrepreneurs still aren’t able to find funding at anywhere near the same level as men.
We’ll talk with Anu Duggal, the founder Female Founders Fund, a firm that invests exclusively in startups with women founders as well as Kathryn Tucker, CEO and founder of RedRover, who has navigated the venture capital landscape as an entrepreneur about why women-founded startups aren’t getting funded and what’s being done to fix the problem.
Join the discussion live on Friday March 6th at 11 a.m. ET by adding your questions and comments below.
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Hi, this is Kathleen Davis, Leadership Editor here at Fast Company. We are ready to get started in just a few minutes. But first let me introduce our guests
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Anu Duggal is the founder of Female Founders Fund , a firm that invests exclusively in startups with women founders. She is also an entrepreneur herself, she founded India’s first wine bar, and co-founded Exclusively.In a designer Indian clothing site. She was also named one of the top angel investors in New York in 2012.
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Kathryn Tucker is the founder and CEO of RedRover a local search engine for parents. She has spoken publicly about her experiences securing funding as a women founder, including at a panel called “Fundraising While Female” during last year’s at Internet Week in New York.
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First let’s talk about both of your experiences. You come from opposite sides of the equation in a way – one of you, Kathryn, is an entrepreneur who has experience seeking funding for her startup and the other, Anu is also an entrepreneur as well as heading an investment firm that exclusively funds female-founded startups. Anu, let’s start with you, why is there a need for Female Founders Fund?
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I started F Cubed to focus on the opportunity of funding an under-capitalized demographic. The core thesis of the fund is that the patterns of traditional venture will change in the next five to ten years with more talented women leading and founding venture-backed companies and we aim to tap into that trend.
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Kathryn what has been your experience in trying to secure funding for your RedRover?
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While Kathryn is typing her answer, here is an article we ran recently about how several women secured VC funds
6 Women Entrepreneurs Share How They Raised VC Funds
Fast CompanyFrom shutting down flirtatious advances to conveying confidence, women share the challenges they faced in funding and how they succeed. -
My own experience has been largely positive, but I've seen the challenges female entrepreneurs face and that needs to change.
I raised a large seed round in a short time in 2010. I then gathered angels into a follow on round and now I'm in negotiations, which I am unfortunately not at liberty to discuss -- but there has been significant interest and I feel encouraged and supported by the VCs interested in the deal. -
Kathryn is your funding from an all female fund or male?
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The largest amount is from a private equity firm that has male and female leadership.
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There seems to be two opposite and almost contradictory things happening: Women-owned businesses are growing faster than the national average, yet those women entrepreneurs still aren’t able to find funding at anywhere near the same level as men and the number of women decision-makers in venture capital firms has declined from 10% in 1999 to 6% today. Which leads me to two questions:
Why are there more women entrepreneurs who are more successful than ever yet they are getting less funding? And why are there are fewer women in positions to make decisions about funding? -
That stat is from this article
Why The Few Women Venture Capitalists Often Give Up
Fast CompanyHow the funding landscape has changed for the worse and the women attempting to change the status quo. -
I actually view progress on both ends. As it relates to women who have the ability to fund - I feel that while there aren't as many senior partners at more traditional funds, there are more women starting funding vehicles then ever before - Theresia and Jennifer at Aspect, Aileen at Cowboy Ventures, Kirsten at Forerunner and more. In terms of women getting funded, we track Series A fundings as this is when VC's/institutions get involved. We recently published a historical analysis comparing Series A announcements in 2013 and 2014 in New York. In 2014, out of 90 A rounds, 12 were led by female founders, compared to 2013 when there were 53 A rounds and only one led by a female founder. More info is available on the link below. Bottom-line, I feel progress has been slow, but it is definitely happening.
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And to that point, I have seen a lot of inbound interest in what I'm working on and next steps for the funding. I have a few VCs in particular who have been tracking my progress and are interested in the space.
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Anu is right. Progress is happening, albeit slowly.
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Isn't it the angel round to begin with or the initial funding that is hardest to crack?
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In my case, I was coming to tech from the film business where I had taken a number of projects from start to finish. So, in a way, I wasn't a first time entrepreneur. Those movies were in a sense small companies that I shepherded from idea to market.
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So when I went in to meetings, I could speak to having the spark of an idea, how I would execute it and then proof in the market.
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I was also pitching a product missing from the market -- and much needed. The investors had the need for the product personally so they were motivated and the deal was done quickly.
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I would say that more and more founders are raising angel or seed funding. In terms of the funnel, it is much much harder to raise institutional capital. At that point, the company needs to have real metrics, traction and revenue. That is the point where I see more companies struggle.
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A female founder and I were talking about how much more proof women have to have for their ideas. The rigor expected is intense, which speaks to Anu's point.
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In fact recently there was an MIT study that showed that male voices are funded over females.
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A Harvard Business School study last year showed that when presented with the same pitch, investors chose the male entrepreneur’s—even when the content of the pitch was the same. www.hbs.edu
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There is a theory that the lack of previously funded women-founded businesses ends up being a self-perpetuating cycle because venture capitalists make decisions based on similarities to previously successful businesses they funded. How do we break this cycle?
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Something I've been wondering in the whole pattern recognition debate is whether VCs haven't seen the pattern recognition of failure yet. They answer to their investors -- their investors are comfortable with 27 year old boys in hoodies failing. Is it easier to answer for a pattern of failure those LPs have already seen?
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That's such a great point! It makes me wonder--since there are so few women getting funded does it put the pressure on the ones there to be twice as good. Are women entrepreneurs not allowed to fail?
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I wouldn't put it that way so much as I'd say that it is a factor in less funding for female entrepreneurs.
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In VC meetings I've had intense scrutiny from female VCs because if they champion you, the factors reverberating in your success or failure have amplified effects for them.
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I agree that the pattern needs to be broken and I think based on the data I mentioned above, we are starting to see change in this pattern, both on the investing side as well as the entrepreneurial side. Even amongst our own portfolio - we have seen some of the top VC's on the east and west coast investing in female founders. In addition, I also see more and more women from great companies like Google, Facebook, Twitter, Gilt, and Rent-The-Runway starting companies. Having this exposure to venture-backed companies also gives them a very valuable perspective when starting their own.
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How A New Investment Group Led By Female Twitter Execs Could Help Solve Silicon Valley's Diversity Problem
Fast CompanyThe tech world desperately needs more female-led investment groups. Angels may become a powerful player. -
What about products that are directed towards women? Do you find the traditional venture capital landscape to be less interested in new female-oriented products?
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No, not at all. If you look at some of the largest venture-backed companies built here in NYC, they are all targeting female consumers - Diapers.com, Gilt, Rent-The-Runway, as well as Etsy amongst others. I think VC's do recognize that the female consumer base is very strong - but in order to invest in this, there needs to be a strong team to back.
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There are so many more women now with relevant backgrounds who understand what building a start-up is like and can use those learnings to start their own. Five or ten years ago, this wasn't the case.
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In our own portfolio, we have five women who are all ex-Quidsi employees. I can see how the training at Quidsi has translated into their approach on their own companies - much more data-driven and with a strong understanding of key goals and metrics.
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The tech industry as we know it is relatively new -- 40 years? I agree, Anu, that as more women with tech credentials break out and form their own companies we will see change.
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There has been some research that has shown that women do better when they have a male cofounder, have either of you seen this or think it's true?
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A related article we ran about it:
Why Women Often Don’t Lead The Companies They've Founded
Fast CompanyGender still matters in leadership in 2014. Women work twice as hard to secure VC funding, and often end up not taking on a male co-owner. -
In my own case, I wonder about the merits/disadvantages of being a single founder as much as I wonder about my path had I had a male co-founder.
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That hasn't really been my experience to date. In our portfolio, we only have one case where we have a male co-founder. As it relates to co-founders, my advice is always to find someone who has a complementary skill-set as it relates to the business you are launching.
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One of my favorite facts about female-led companies is their capital efficiency. The Kauffman Foundation found women-led high-tech companies typically launch with capital at levels that are 30-50% less than those led by men. I feel this to be true. I think it speaks to the fact that women feel they need to be twice as good, and twice as efficient.
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They can build more on less. And funding should follow that.
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We are almost out of time, so we’ll end with a big picture question: Do you think the alternative sources of funding that women are using (including firms that only fund women-founded businesses like Female Founders Fund) will have an impact on the big picture funding landscape or change the way large VC firms operate? What is the future for women-led businesses in funding? -
I think they will and the reason why is that we don't have enough examples of women founders going all the way from start to finish. Anything that puts more women on that track helps us all.
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Yes - absolutely. Ultimately, if talented female founders get funding and are able to prove that they can build big businesses that generate great returns for investors, that will be game-changing. This is exactly what F Cubed aims to do. Put money and strategic resources behind great women operators to show they can start and grow large companies that will hopefully change the way VC's view female founders.
