Women Founders Confront the Gender Funding Gap

Maria De Santis, principal at Muse Capital, says that VCs may be overlooking opportunities because they're chasing a vision of what successful founders looked like in the past.

"There's a lot of data out there that goes to show how female teams actually outperform all-male teams. But I think there is also bias in the system in the sense that a lot of how this industry operates is through pattern recognition," De Santis says.

Barriers to Funding

Women founders who try to fundraise from VCs run up against a variety of hurdles.

Blessing Platinum-Williams created Tonely AI after learning to code during the COVID-19 pandemic. Her product detects tone in text messages and offers users feedback on how their words might be received, while keeping all the data on their devices.

She says that there's a lot of interest in her product because it uses AI but that investors are reluctant to back a female founder in that space. They want to see proof of viability early, which is a difficult bar for women and others from underrepresented backgrounds who might not have the same access and resources as some of their male peers.

"What I've found is that when I have to meet with investors, they expect traction," Platinum-Williams says.

Laura Fortey co-founded REITIUM, a crowdfunding portal that makes real estate accessible to everyday investors, with two male business partners, one of whom later left the company. Both of her original co-founders were visible minorities.

"A lot of times we would even pitch VCs that say they invest in diversity and Black founders and women founders. And it seemed to always come back to that they kind of don't really. It's kind of like a mandate that they say that they do, but they don't really when it comes down to it," Fortey says.

All three co-founders faced difficulties when pitching VCs, but Fortey says that she encountered additional biases as a result of her gender.

She received more challenging and personal questions than her co-founders. Rather than asking about her vision for the company, VCs would question why she was the right person to lead it.

"In some instances, people would not even assume that I'm a founder and they would immediately talk to just the men even if I was the one pitching," she says.

Fortey says that investors were skeptical of a woman founder in proptech and fintech and questioned her expertise in those fields. Women founders in stereotypically feminine spaces like beauty or menstrual products seemed to her to have an easier time getting funded.

"They still had a lot of similar issues, but it was understood by the people investing that you're a woman and you probably understand that market," Fortey says.

Still, VCs don't necessarily see the value in products created for female consumers. Jennifer Dwork, co-founder and CEO of Bummed, a telehealth platform that focuses on anorectal care, says that VCs have brushed her off by saying that they've invested in other telehealth companies and don't need more in their portfolio. Anorectal conditions are common during pregnancy, but VCs didn't always seem to recognize the significance of Bummed's pregnancy-safe formulations.

"There was also a lot of questioning about how big the problem was as if they didn't truly believe our assessment of the marketplace," Dwork says.

Dwork notes that VCs typically want to invest in post-revenue companies or in founders who have had successful exits, although they sometimes take chances on founders who don't yet have extensive metrics to share.

"It looks like a lot of males who the investors are taking that bet on," she says.

Boosting the Odds

No founder as an individual can eradicate biases in the VC system, but there are a few things women can do to increase their chances of successful fundraising despite the inequities.

The first is something many women are used to doing anyway: overprepare. Be ready to share as much hard data as possible, and be knowledgeable on all aspects of your company.

"I've encountered times where I've spoken to the CEO and they may not be the technical person, but they will say things like, 'Let me ask my CTO.' You've got to be really ready in all areas of the business," De Santis says.

Stay in charge of the narrative. If you find yourself receiving overly pessimistic questions, take a moment to answer the objection and then add more positive information on your company's future prospects.

Try to target VCs and angels who are aligned with your perspective so they recognize the need for your product. Check the companies they've invested in before; if you're creating a sugar-free candy, for example, an investor who's backed other health foods might be receptive to your pitch.

"You've got to find people who already see the opportunity and believe in what you're building," De Santis says.

Look to advisors for help breaking into the VC ecosystem.

"Surrounding yourself with people who maybe have built something in your space before, who have fundraised before and want to advise your business, that's incredibly valuable as they will already have the Rolodex and really help you there," De Santis says.

Take an expansive view of networking. When Fortey traveled with her co-founder, they didn't sit in adjacent seats on the airplane because they wanted to maximize the number of new people they could meet during the flight.

Platinum-Williams has made useful connections in unexpected places, like a hiking group and the PTA at her children's school.

"A lot of the time, if people have managed to know you on a personal level, they will be willing to support you," Platinum-Williams says.

Finally, follow up with everyone you talk to. An investor who can't offer funding right now might be able to make introductions to someone else who will.

A Pivot Away from VC

Due to the difficulty of securing funding from VCs or angel investors, many women bootstrap their companies or fundraise from friends and family.

Platinum-Williams has been able to keep her startup afloat because she and her husband run another business together. She says that bootstrapping hasn't been ideal because it's limited her ability to scale.

At the same time, she sees some positives in the situation. She can stay true to her privacy-first approach and doesn't have to contend with pressure from investors to harvest user data for training. And she's able to be more intentional about making changes to her product.

"Because it's on a smaller scale, it's allowing me to see what works and what doesn't work without that much risk," Platinum-Williams says.

Dwork and her co-founder decided that pitching VCs and angels was using up too much time that would be better spent building their company. They pivoted to raising funds from high-net-worth individuals they knew.

"We held a call with our friends and family, also doctors who were in our network, and kind of talked about what we were doing, and we raised enough to get us to launch for a few months of operating. And our plan is to try to just get to profitability as quickly as possible," Dwork says.

They've kept in touch with some VCs who gave them good feedback, but for now, they're happy with their small group of backers.

As for Fortey, she and her co-founder ultimately won VC funding through accelerators they participated in. But the experience of pitching over 100 VCs individually and dealing with unsustainable startup industry demands left her feeling burnt out.

Today, she's preparing to launch her own accelerator for women called Flow State Founder. She plans to incorporate wellness and community in addition to networking and fundraising, and she wants to help women founders explore grants and other alternatives to VC funding.

"Thankfully the toxic culture has gone away a bit. But the pressure of constantly having to run at that pace, that has to change. And I'm excited to actually be a very small part of forcing that change," Fortey says.

A Transformation Underway

Although the gender funding gap isn't likely to disappear overnight, there are signs of an impending shift.

De Santis points out that when women-founded companies prosper, investors tend to take notice. They update their assumptions about who could build the next unicorn.

"One of our women's health companies, a company called Midi Health, reached a $1 billion valuation. And this is a company in the menopause space, which when we first looked at it people were asking us, 'Isn't that a niche market?' And five years later, this company is one of the biggest women's health companies out there," De Santis says.

And a wealth transfer toward women is ongoing that may reshape institutional investing. McKinsey & Company predicts that by 2030, women in the U.S. will control wealth totaling $34 trillion, or about 38% of U.S. assets under management. As women oversee more capital, they might invest in women founders who were previously underestimated.

"The truth is that women need to become investors and then women will get invested in," Fortey says.