The pandemic hit female entrepreneurs disproportionately hard, cutting private fundraising by nearly one-third this year after steady gains the prior three years.
The silver lining: Job losses and a shifting economy have encouraged more women to consider starting out on their own. Some of the hottest areas are fintech, media, and digital health.
Venture capital funding for businesses led by women reached $13.7 billion through the first three quarters of this year, down 31% from the comparable period last year, according to a report published Tuesday by PitchBook. That compares to the 17.9% drop for all U.S. companies through September.
U.S. startups founded by women represent 23.3% of all venture capital fundraising completed through September, compared with 23.8% for all of last year, only a slight dip. Women-led companies also made up 13% of venture capital dollars spent this year, down from 15.5% last year.
Many female entrepreneurs delayed startup plans as the pandemic ravaged the worldwide economy, PitchBook concluded in a report on fundraising activity.
“The pandemic forced many would-be founders to put their plans on hiatus, which also helps explain female founders’ reduced share of venture deal activity in 2020,” the report said.
A Female Founders Alliance survey found that 87% of pre-pandemic survey respondents were “somewhat or highly likely to start a company,” but six months later “51% of them have delayed or scrapped these plans,” while a small minority of them accelerated their plans, PitchBook said.
Fundraising by women-led startups for all of 2019 was a record $20 billion. That compares to $2 billion raised in 2010.
While many would-be entrepreneurs have put startup plans on hold, applications for new U.S. businesses are rising at the fastest rate since 2007, PitchBook said, citing data from the Census Bureau. And it pointed to another survey by JustBusiness that found more than one in five entrepreneurs are starting businesses that were not planned before the pandemic.
Katie Doherty, the co-founder of Female Founder School, reports that registrations for its online workshops spiked after March. Participants had more unscheduled time outside of work or more discretionary time because of a job loss.
“We’ve heard from others that the pandemic has led people to rethinking career interests and a heightened desire to have societal-level impact via entrepreneurship,” Doherty told PitchBook.
The increase in the number of startups created since March presents an important opportunity to close the gender gap, according to Annie Parker, the director of Equity and Inclusion at Microsoft for Startups, which helps new companies get off the ground.
In 2019, around 20% of startups globally had at least one female founder, according to PitchBook data. “That number could increase significantly,” Parker said, if more money were available to support women and help aspiring founders take the leap.
After interviewing 50 entrepreneurs, Parker said the striking conclusion was that “almost all the women regretted not starting their companies earlier.”
Companies led by female CEOs raised $6.5 billion through September, which would be the third-highest annual total, PitchBook said.
In fintech last year, 169 venture deals closed with female-founded companies, raising $1.3 billion. Through September this year, 115 investments have closed totaling $1.1 billion. “2020 has been an unplanned test case for digital payments, digital lending, and a host of other applications,” the report said.
Female-founded media companies may hit an annual peak this year, PitchBook said. So far, 86 deals have raised $475 million, which is already the third-highest annual total.
Write to Liz Moyer at liz.moyer@barrons.com
December 08, 2020 at 09:00PM
https://www.barrons.com/articles/venture-capital-funds-led-by-women-hit-hard-by-pandemic-51607436010
Venture Capital Funds Led by Women Hit Hard by Pandemic - Barron's
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