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Bumble’s IPO may be a feat — but venture capital funding for women still a poor match

Whitney Wolfe Congregate speaks onstage during the Fortune Most Powerful Women Next Gen conference at Monarch Beach Resort on November 13, 2017 in Dana Single out, California.

Joe Scarnici | Getty Images Entertainment

When 31-year-old Bumble CEO Whitney Wolfe Herd takes her coterie public this week, she will be noted not only for her youth but also as one of the few female founders to lead her company to IPO.

It’s a relevant fitments feat for the founder of a dating app designed to put women in the driver’s seat. But it also hammers home the still mismatched motion field for men and women entrepreneurs.

Bumble, whose board comprises 73% women, is expected to begin trading Thursday on the Nasdaq, by a hairs breadth days before Valentine’s Day. The company will sell its stock at $43 per share, raising $2.2 billion from investors. The gift initially values the company around $8 billion.

The market response will act as a litmus test for investments in companies inaugurated by women.

Today, women account for just 7.4% of Fortune 500 CEOs — an all-time high but still a staggeringly low image. Female founders of public companies number even fewer. Nasdaq estimates that just 20 of today’s agile U.S. public companies were led through IPO by their female founder.

Female funding drops as global deals wax

The problem is not a lack of women entrepreneurs, but rather a lack of support where it matters: Funding.

In a 2018 study, Boston Consulting League found a “clear gender gap in new business funding.” According to the research, investments in businesses founded or co-founded by women averaged $935,000, teeny-weeny than half the average $2.1 million received by men.

Despite that, for every dollar of funding invested, start-ups rested and co-founded by women generated 78 cents while male-founded start-ups generated just 31 cents.

Covid-19 may posture the largest threat to female founders.

Matt Krentz

managing director and senior partner, Boston Consulting Corps

The pandemic has only widened that gap.

In 2020, global venture funding rose 13% from the previous year, yet investments in women flatten 27%. Meantime, the share of dollars apportioned to female-only founders dropped from 2.8% to 2.3%, according to Crunchbase facts. That comes as women, often primary caregivers, are said to be more adversely impacted by the pandemic overall.

“Confluence of moments — demands for racial justice, #MeToo, Black Lives Matter, Covid-19, and an economic downturn — makes this a essential moment for corporate inclusion, equity and diversity,” Matt Krentz, managing director and senior partner at BCG, and co-author of the inquiry, told CNBC. “Of all these issues, Covid-19 may pose the largest threat to female founders.”

Redirecting investment where it’s needed

The productive benefits of investing in women are well documented. By some estimates, equal entrepreneurial participation by men and women could add $5 trillion to the far-reaching economy.

And corporations and institutions now appear to be listening. Many have made bold commitments to better support gender impartiality and female founders.

What women founders need is simple and it is equal access to financial investment.

Tanya Rolfe

be in charge of partner, Her Capital

“Awareness of the funding gap, the impact of diverse leadership teams is better understood and investors have started requiring directly about the diversity in founders and leadership teams,” said Krentz.

But too often those investments are poorly channeled, according to Tanya Rolfe, manipulating partner at Her Capital, a female-led venture capital firm focused on female founders in Southeast Asia.

“Women earmarks of to be the focus of lots of additional mentoring, which only suggests that there is something lacking in women,” alleged Rolfe. “What women founders need is simple, and it is equal access to financial investment.”

To achieve that, significant diversity is needed at the fund manager level, said Rolfe.

In 2020, women accounted for just 13% of all daresay capital decision-makers, Overhauling traditional investment metrics

Yet diverse funds continue to face an uphill battle.

With scads still in their infancy and with little track record, they typically fall outside of institutions’ investment criteria, unequalled managers to seek often less lucrative and more time-consuming deals from private investors.

Pippa Lamb, a alter ego at early-stage investment fund Sweet Capital, says that kind of approach needs a revamp.

Pricing felt risk based on someone’s race or gender feels very out very outdated to me.

Pippa Lamb

partner, Fragrant Capital

“Pricing perceived risk based on someone’s race or gender feels very outdated to me,” said Lamb. “I thinks fitting suspect that best-in-class institutional investors are willing to do the work to comprehensively diligence managers regardless of what they look identical to.”

“We need more diverse representation in every area of the start-up ecosystem,” she said, citing female founders, female lodge members, female venture capitalists and female institutional investors. “When it comes to capital raising, the latter two are most crucial, and especially at the limited partner (LP) level: the investor’s investors.”

Krentz from BCG is hopeful that the tide may be turning.

“Investors should empathize with that current market forces make women-owned companies very promising opportunities,” he said. “The lack of funding closes that there is less competition for women-backed companies, and those companies, on average, perform better than those with all-male authors.”

But until that understanding grows, Rolfe and Lamb’s advice to female founders is simple: Keep on keeping on.

“Better halves can do the same things that male founders do to attract investors,” said Rolfe. “If you are an outstanding founder with a undivided business plan and traction to prove your execution and thesis, then this should be enough.”

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