March 8 - International Women's Day: Recent trends in Entrepreneurship and Venture Capital

Friday, March 8, 2024 is International Women's Day as celebrated around the globe. One area of interest in the entrepreneurship community is seeing the growth of female-founded firms in the US as based by Venture Capital. The Private Equity/VC database Pitchbook recently published a report (along with Deloitte, Wilson Sonsini, etc.) on the trends of Female-Founded VC-Backed firms in the US over the past decade or more. (Link to detailed report below). In summary, the overall trend is positive yet mixed, here are some highlights in the report:

• Female Founded VC backed firms represent less than 10% of VC-backed firm deal activity in the Silicon Valley VC ecosystem .

• The activity peaked in 2020, declined in 2021-22 and has increased closer to 2020 levels.

• Female-Founded VC backed firms represented just under 23% of VC deal value in 2023, an all-time high, excluding OpenAI activity whose female founder left the firm prior to OpenAI's $10B raise.

• PitchBook’s authoritative US VC female founders dashboard shows that companies founded solely by women scored only 2% of VC capital in 2023—a level that has scarcely changed since 2008 (and has never topped 2.8% in those 16 years).

The trend over the past few decades is positive yet when one considers that the composition of women in college and universities in the majority, there is still progress to be made. In the VC and VC-backed enterprise world, it is especially important for more progress to continue. VC-backed companies generate tremendous wealth and employment growth in the US and around the globe. Potential benefits of increasing the founding and funding of female-founded firms in the VC :

Supporting female-founded firms with more venture capital (VC) investment can have a wide range of benefits, both for the economy and society at large. Such benefits of increasing funding for female-founded firms include:

• Diversity of Thought and Innovation: Female founders bring different perspectives, experiences, and problem-solving approaches, which can lead to innovative solutions and products. This diversity of thought can drive creativity and innovation, benefiting industries and markets.

• Market Expansion: Female-founded firms often address market needs that are overlooked or underserved, targeting demographics and niches that male-founded firms might not. This can lead to the expansion of markets and the creation of new industries.

• Social Impact: Many female entrepreneurs are motivated by a desire to make a positive impact on society. Investing in female-founded firms can support ventures that prioritize social and environmental responsibility.

• Potentially Higher Returns: Limited research has shown that companies with diverse leadership teams, including gender diversity, tend to have higher financial returns. Thus, investing in female-founded firms can be financially beneficial for investors.

• Building Role Models: Successful female entrepreneurs serve as role models for future generations, inspiring more women and girls to pursue entrepreneurship. This can help to gradually balance the gender disparity in business ownership.

• Utilizing Untapped Talent: Women represent a significant portion of the talent pool. By investing in female-founded firms, the economy can better utilize this untapped potential, leading to more robust and resilient industries.

Increasing the number of female-founded, venture capital (VC)-backed firms requires a multi-faceted approach that addresses both the systemic barriers women face in accessing capital and the broader ecosystem's support structures. Here are several strategies and suggestions currently being implemented that are assisting in achieving the objective of increasing female-founded VC-backed firms:

• Enhance Visibility and Networking Opportunities: Networking events, workshops, and conferences specifically for female entrepreneurs to connect with investors, mentors, and each other.

• Foster Female-focused Investment Funds: Encouragement for the establishment of more VC funds that specifically target investments in female-founded firms. Support angel networks and crowdfunding platforms that focus on female entrepreneurs.

• Implement Bias-reduction Training: Training for investors and VC firms on unconscious bias to help reduce gender biases in funding decisions. Adopt blind screening processes in the early stages of evaluation to focus on the business idea and plan rather than the gender of the entrepreneur.

• Promote Mentorship and Advisory Support: Development of mentorship programs that connect female entrepreneurs with successful business leaders and entrepreneurs for guidance and support. VC firms to offer advisory support to female founders, helping them navigate the challenges of scaling their businesses.

• Encourage Policy and Regulatory Changes: Policies that support female entrepreneurs, such as tax incentives for companies that invest in female-founded firms or government-backed funding programs specifically for women-led startups. Work with industry associations to set targets or guidelines for investing in female-founded companies.

• Education and Empowerment: Educational programs, workshops, and resources focused on entrepreneurship, finance, and investment to women at various stages of their careers. Encouragement of female participation in STEM fields and entrepreneurial education from an early age to build a pipeline of future female founders.

• Success Stories and Role Models:Highlight and celebrate the success stories of female entrepreneurs who have successfully raised VC funding to inspire others. Provide platforms for successful female founders to share their experiences, challenges, and advice with aspiring entrepreneurs.

• Financial Instruments and Support:Develop financial products and services tailored to the needs of female entrepreneurs, including flexible lending options and grants. Increase access to capital through microfinance and small business loans targeted at female founders.

Implementing these strategies requires collaboration among various stakeholders, including investors, governments, educational institutions, and the entrepreneurs themselves. By addressing the specific challenges that female founders face and creating a more inclusive and supportive ecosystem, it is possible to significantly increase the number of female-founded, VC-backed firms.

2023_US_All_In_Female_Founders_in_the_VC_Ecosystem.pdf

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