What the Bros Don't Get
The Power of Female Founders
As venture capitalists, our mission is to seek out and invest in promising startups that boldly embrace unconventional ideas. An often underestimated and overlooked area of opportunity deserving greater attention is the potential inherent in investing in women-led startups.
Sophia Zhao
Venture CapitalistSophia Zhao is a member of AV’s Women’s Fund team, as well as the AI Focused Fund team. She brings over a decade of experience working in tech and finance with a focus on Web3 and AI in recent years. Sophia is an alumna of Yale School of Management and the University of British Columbia.
But here’s the unwelcome truth. There’s a human tendency to — consciously and unconsciously — favor people like ourselves in politics, hiring, friendships, and more. It’s painfully evident in my industry, venture capital, where nearly 60% or more of the professionals are white men. And they don’t — simply don’t — back people who are not like them.
Politics and polemics aside, that’s a wasted investing opportunity. In this blog, I will just focus on the strong case to be made for the track record and potential of female founders and leaders in venture startups. I’ll examine the staggering size of the Sheconomy, the multiple benefits of investing in women, plus the amazing startups women are creating.
And if you’d like to extend the discussion, please join our webinar.
RICH WOMAN, POOR WOMAN
Let’s start with the big picture. Women constitute 48% of the global population and contribute to 35% of the global workforce. Looking ahead, the world will see a rise in female graduates, postgraduates, and professionals, with increasing representation in leadership and managerial roles. Additionally, there will be a notable surge in women’s influence over consumer decisions and a shift towards women becoming primary breadwinners, financial contributors, and heads of households. Women are anticipated to make 85% of day-to-day spending decisions and are already making 80% of healthcare spending decisions for their families.
The economic influence of women has created a huge $20 trillion Sheconomy. In the United States, American women oversee more than $10 trillion in assets — a figure expected to triple over the next decade. This financial empowerment is driven by greater workforce participation, educational achievements, and wage growth among women.
However, women entrepreneurs face a different reality: a persistent challenge in securing capital. U.S. startups with women founders or led by a woman received a mere 13% of the roughly $238.3 billion in venture capital invested (PitchBook).
Pause for a moment.
13%.
This small percentage underscores the pressing need for a big change.
Female founders — already perceived as inherently riskier than their male counterparts — often find themselves overlooked until the next social movement captures everyone’s attention for positive change.
There’s a substantial missed opportunity in this approach. Analysis conducted by the Boston Consulting Group (BCG) indicates that if women and men were to participate equally as entrepreneurs, global GDP could experience a significant boost of approximately 3% to 6%. This increase could translate into a substantial economic uplift ranging from $2.5 trillion to $5 trillion globally. There’s also data to show that women founders outperform men in key respects. Let’s further break down the case for more female founder funding.
WHY WOMEN FOUNDERS
These are some of the key reasons our Women’s Fund advocates support of female founders and leaders.
Diverse Perspectives
Women founders often bring unique perspectives, experiences, and ideas to the table, which can lead to innovative solutions and products. Unfortunately, in male-dominated environments, these contributions may be overlooked.
Crunchbase, a VC funding tracker, reports that 92% of partners at major VC firms in the U.S. are men. That similarity bias I referred to earlier is at work here, with men often failing to appreciate ideas presented by female founders, especially those rooted in personal experiences such as offerings in childcare or beauty. Many female founders have spoken of challenges in communicating the need and value of their ideas to male investors.
An example of a company that overcame that barrier was AV-backed children’s product marketplace Maisonette, which was founded by two moms in 2017. According to CEO and Co-Founder Sylvana Durrett, the goal was “to make it easier to find high-quality products for [their] kids, so [they] could spend less time scrolling and more time on the good stuff. To empower parents to make the best decisions for their families.”
Being a new mother, I turn to Maisonette’s meticulously curated marketplace for babies’ products — a showcase for the finest goods from across the globe, including clothing, toys, and gear.
As a VC, I appreciate startups that effectively tackle real pain points, providing innovative solutions that genuinely improve the status quo.
Market Opportunities
Women represent a significant consumer demographic, and women entrepreneurs are often better positioned to understand and tap into this market, creating products and services that resonate with female consumers.
In 2013, women’s health expert Tania Boler founded Elvie with a focus on addressing the specific needs of mothers. The company’s product — a hands-free, wearable, silent, and small breast pump — was designed to free up mothers’ hands, enabling them to be more productive throughout their busy days.
As I write this blog, I am using Elvie to pump for my 4-month-old, finally finding a solution that allows me to efficiently balance both work and mommy duties.
As a VC, I see a widespread problem solved by this product tackling an intimate and often overlooked challenge that impacts the health and well-being of mothers.
Economic Growth
Investing in women-founded startups can stimulate economic growth by fostering entrepreneurship, creating jobs, and contributing to the overall development of the business ecosystem. Research from the Boston Consulting Group demonstrates that if women and men had equal participation as entrepreneurs, global GDP could increase ~3% to 6 — a boost to the global economy of $2.5 trillion to $5 trillion.
Carry1st, a company AV invested in, exemplifies the potential. Co-Founder and Chief Operating Officer Lucy Hoffman is helping expand mobile gaming into one of the last untapped frontiers in the $190 billion gaming industry. Recognized as Africa’s premier mobile gaming publisher, Carry1st is not merely carving a niche; it’s orchestrating a transformative venture. As Carry1st investor a16z noted, “Carry1st is building a generational company for an entire area of the world.”
Returns on Investment
Research suggests that women-founded startups often outperform their male counterparts when it comes to financial returns, as diverse leadership teams can enhance decision-making and drive business success. A Boston Consulting Group states that women-founded startups “ultimately deliver higher revenue — more than twice as much per dollar invested.” One plausible explanation is that the heightened scrutiny from investors may produce more robust business plans and foster resilience and adaptability, crucial skills for entrepreneurs.
Another Alumni Ventures’ portfolio company, Spero Foods illustrates the potential. Spero was founded by Phaedra Randolph in 2016 with a mission to outcompete traditional dairy and egg products in scale, price, taste, and nutrition. Using patent-pending tech, they transform low-cost, sustainable, and scalable ingredients into plant-based dairy.
As a consumer, I’m looking forward to sampling its upcoming product launch, which will include plant-based cheese products. I hear they can fool even the most ardent dairy connoisseur.
As a VC, I let the results speak for themselves. The company was recently acquired by Superlatus, a wholly owned subsidiary of TRxADE HEALTH, Inc. (NASDAQ: MEDS), a pharmaceutical exchange platform provider.
Feeding the Talent Pool, Reducing the Gender Gap
Investing in startups founded by women helps expand the talent pool, narrowing the gender gap in entrepreneurship and inspiring more women to embark on their entrepreneurial journeys. According to an analysis conducted by Kauffman Fellows, a program dedicated to accelerating investors’ success, companies led by a female founder and having a female executive hire six times more women vs. companies led/founded by men. By supporting such startups, we help strengthen these networks and increase opportunities.
Further, funding women-founded startups can help bridge the gender gap in entrepreneurship and create a more equitable business landscape, which benefits society as a whole. As more women secure funding for their ventures, it generates a cascade of success stories, fostering a greater openness among investors to back female-led enterprises. This positive feedback loop is instrumental in creating a more diverse, inclusive, and supportive landscape for women entrepreneurship.
Social Impact
Many women-founded startups focus on addressing social, environmental, and diversity issues, making a positive impact on society. Investing in these startups can lead to meaningful change in areas such as healthcare, education, and sustainability.
Our AV portfolio company, Thousand Fell, is a great example. Chloe Songer co-founded the company in 2019 with the mission of creating fully recyclable sneakers. Using innovative materials such as recycled bottles, yoga mats, food waste, and vegan leather, Thousand Fell squarely addresses the waste issue in the fashion industry. The brand introduces a novel approach where customers ready to dispose of their shoes can scan a microchip embedded in their sneakers to download a complimentary shipping label and return them for recycling.
As a mom, I love companies that think about my child’s future, and I particularly appreciate Thousand Fell’s circularity ethos.
As a VC, I’m attracted to a business that builds innovative solutions to urgent needs that have a large, addressable, and expanding market, all while contributing positively to the well-being of our planet.
CLOSING ARGUMENTS
Investing in startups led by women extends beyond promoting gender equality. It’s a strategic business move that fosters innovation, profitability, and a future marked by greater equality and prosperity. The solution doesn’t lie in VCs merely supporting women-founded startups for the sake of it. Instead, it requires dismantling institutional and mindset barriers that keep VC firms from recognizing the potential inherent in the founders and their ideas.
Alumni Ventures is already doing its part. Our track record: 20% of our portfolio companies are founded or co-founded by women. I’d love to see this number increase, and AV’s Women’s Fund will help us do that.
Please join our webinar to hear more about the challenges and opportunities for female founders and leaders. You can sign up here.
References
Solal, Isabelle, and Kaisa Snellman. “For Female Founders, Fundraising Only from Female VCs Comes at a Cost.” Harvard Business Review. February 1, 2023.
US VC Female Founders Dashboard.” Pitchbook. January 2, 2024.
Kapaun, Camille. “The Illusion Of Venture Capital For Female Founders.” Forbes. June 21, 2022.
Hanson, Kait. “Why a Baby at the Nasdaq Opening Is Such a Big Deal.” Today. February 11, 2021.