ENTREPRENEUR NEWS ROUNDUP: FEBRUARY 24, 2022
Venture Capitalists Find Higher ROIs Investing in Women-Led Startups
While women-owned businesses are thriving, their ability to access capital lags. There is, however, cause for optimism.
Women own 1.2 million businesses in the United States, accounting for approximately 21% of all employer businesses. Women-owned businesses are growing twice as fast as other types of businesses.
And women-led business growth is more than a matter of quantity. According to First Round Capital, female-led startups generate 63% more value for investors than male-led startups. Similarly, the Kauffman Foundation discovered that women-led teams generate a 35% higher return on investment than all-male teams.
But women-led businesses are 63% less likely than men-led businesses to receive venture capital funding, and less than 2% of total venture capital funding went to women-founded businesses in 2021, down from 2.2% in 2020.
The numbers for bank lending are slightly better, but there is still room for improvement. The SBA reported that women-owned businesses received 13.7% of its 7(a) loan approvals, a slight increase from 2020.
History demonstrates that women-led businesses are better equipped to thrive in uncertain economies like the one we are currently experiencing. Women Business Enterprises (WBEs) and Minority Women Business Enterprises (MWBEs) sustained significant losses in the aftermath of the 2007 housing market crash, but emerged stronger. According to a Brookings Institute article, between 2007 and 2012, “MWBEs added 1.8 million jobs, while white male-owned firms lost 800,000.”
There are signs that the startup ecosystem is diversifying. Despite accounting for a smaller proportion of total venture capital investment, companies with at least one female founder received a total of $57.9 billion in venture capital funding, up 138% from $23.1 billion in 2020.
And the proportion of women in decision-making positions at investment firms continues to grow. According to a recent Deloitte survey, 16% of investment partners at venture capital firms are female, up from 11% in 2016.
Additionally, the Biden administration recently announced a $1.5 million commitment to establish Women Business Centers (WBCs) at Historically Black Colleges and Universities. Currently, there are 140 WBCs located throughout the United States that offer counseling, training, networking, workshops, and mentoring to female entrepreneurs. Visit http://www.sba.gov/tools/local-assistance to locate a WBC near you.
In addition, we have a great post on our website with a list of resources for women entrepreneurs.
This week we take a look at three venture funds who are helping women-owned business succeed.
Women-Focused Venture Funds
Female Founders Fund
Female Founders Fund invests exclusively in female founders, and recently announced $57 million in funding, bringing their AUM to nearly $100 million. Here’s a great profile of the fund’s founder, Anu Duggal, about what she looks for in a business plan and pitch deck.
Halogen Ventures
Halogen Ventures focuses on women-led consumer products and technology businesses ranging from fashion to fin tech. The firm, which was founded in 2015 by Jesse Draper, currently has three funds, and recently closed its latest fund at $21 million.
The Equity Alliance
The Equity Alliance recently announced an oversubscribed $28.6 million funding round. In addition to early stage companies, the fund also invests in VC firms that are focused on promoting inclusivity.
Interested in other VCs investing in women? While a little dated, the Female Entrepreneurs Institute has compiled 21+ Venture Capital Firms with Leading Women VCs — Female Entrepreneurs that will get you started.
Based in Portland, Oregon, Masterplans is a veteran-owned company that helps entrepreneurs develop fundable business plans and pitch decks. See how we can help you.
