Female-Founded Startups: 3 Things Female Founders Must Know Before Raising Money

Much of the tech startup advice out there applies to founders regardless of their gender. There are a few issues, however, that female leaders in particular should be aware of.

For example, securing early-stage funding is especially crucial for the success of female-led startups. Below, we’ll go over 3 pieces of advice for women founders looking to raise venture capital.

What percentage of startup founders are female?

Although the number of female startup founders is increasing, according to Statista, there’s still a long way to go before the gender gap is closed:

• Globally, 20 percent of startups have at least one female founder. This figure increases to 28 percent for the United States.
• 14 percent of startups in the United States have a female CEO.

The good news is that the list of women founders and CEOs is long and growing by the day. In fact, there’s never been a better time for female-led startups to raise money.

1. Make funding plans well in advance

Obtaining funding for startups is challenging enough without any barriers in your way. Unfortunately, female-founded startups often have less venture capital invested than do male-founded startups, and are also often subject to greater highs and lows.

The effects of the COVID-19 pandemic have worsened this trend. Between March and June 2020, deals with companies that had all-male founders dipped by 5.4 percent. Meanwhile, deals with companies that had at least one female founder plunged by almost 30 percent over this same period.

What explains this decrease in investment? Investors’ bias perhaps caused them to see female-led companies as “riskier,” even though data contradicts this assumption. According to the venture capital firm First Round, the firm’s investments in startups with at least one female founder have performed 63 percent better than investments in startups with all-male founding feams.

The good news is that since then, women startup funding has been on the rebound. Between January and September 2021, startups with at least one female founder raised over $40 billion—nearly double the amount in all of 2020 or 2019.

While you can’t control everything when raising VC funding—like a global pandemic, for example—you can limit your risk exposure by planning ahead well in advance. This includes determining a realistic valuation for your company, finding the right investors to target, and creating an excellent pitch deck.

2. Search out friendly faces

Mentoring programs and other support outlets for female entrepreneurs are invaluable resources to help get your startup idea off the ground. Similarly, female-founded companies can benefit from support to get through the funding stage of the startup pipeline. This means reaching out to key decision-makers in the startup community who are explicitly supportive of women in tech.

One good place to start: the growing network of female angel investors, founders, and managing partners. According to PitchBook data, for example, the number of female angel investors in the U.S. has gone from fewer than 100 in 2010 to more than 1,000 today. What’s more, nearly one-third of funds from these investors now goes to female founders.

Beyond individual angel investors, also look for venture capital funds and VC firms that explicitly invest in women-led startups. For example, the Female Founders Fund is an early-stage venture fund with the mission of investing in female-founded companies. FFF received $57 million in its third round of funding concluded in July 2021, with investors including Goldman Sachs and Melinda French Gates.

3. Take charge of negotiations

Women-founded startups may face stumbling blocks, assumptions, and biases—explicit or implicit—that their competitors simply don’t. In the words of Steve Martin, female founders need to “be so good they can’t ignore you.”

Your startup pitch and the accompanying pitch deck are the greatest tools at your disposal for winning over investors. Learning how to pitch an early-stage investor, and having your ten-second elevator pitch down cold, is an essential skill that you’ll use early and often as a founder.

Once you arrive at the negotiating table, be assertive and ask for what you think you deserve—even if you’re not certain that you can get it. Similarly, don’t hesitate to say “no” and reject a deal that doesn’t align with your business vision. Have an idea of the ballpark offer that you would be prepared to accept, and be prepared to explain your business’ unique selling proposition that makes it worth the investment.