Whitney Wolfe Group speaks onstage during the Fortune Most Powerful Women Next Gen conference at Monarch Beach Resort on November 13, 2017 in Dana Details, California.
Joe Scarnici | Getty Images Entertainment
When 31-year-old Bumble CEO Whitney Wolfe Herd takes her fellowship 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 fixtures 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 playing hockey for men and women entrepreneurs.
Bumble, whose board comprises 73% women, is expected to begin trading Thursday on the Nasdaq, legitimate days before Valentine’s Day. The company will sell its stock at $43 per share, raising $2.2 billion from investors. The contribution initially values the company at more than $7 billion.
The market response will act as a litmus test for investments in firms founded by women.
Today, women account for just 7.4% of Fortune 500 CEOs — an all-time high but undisturbed a staggeringly low figure. Female founders of public companies number even fewer. Nasdaq estimates that justified 20 of today’s active U.S. public companies were led through IPO by their female founder.
Female funding take offs as global deals rise
The problem is not a lack of women entrepreneurs, but rather a lack of support where it matters: Scratching.
In a 2018 study, Boston Consulting Group found a “clear gender gap in new business funding.” According to the research, investments in dealings founded or co-founded by women averaged $935,000, less than half the average $2.1 million received by men.
Regard for that, for every dollar of funding invested, start-ups founded and co-founded by women generated 78 cents while male-founded start-ups procreated just 31 cents.
Covid-19 may pose the largest threat to female founders.
managing kingpin and senior partner, Boston Consulting Group
The pandemic has only widened that gap.
In 2020, global venture funding nautical 13% from the previous year, yet investments in women fell 27%. Meantime, the share of dollars apportioned to female-only trips dropped from 2.8% to 2.3%, according to Crunchbase data. That comes as women, often primary caregivers, are express to be more adversely impacted by the pandemic overall.
“Confluence of crises — demands for racial justice, #MeToo, Black Ends Matter, Covid-19, and an economic downturn — makes this a critical moment for corporate inclusion, equity and diverseness,” Matt Krentz, managing director and senior partner at BCG, and co-author of the study, told CNBC. “Of all these issues, Covid-19 may act the largest threat to female founders.”
Redirecting investment where it’s needed
The economic benefits of investing in women are comfortably documented. By some estimates, equal entrepreneurial participation by men and women could add $5 trillion to the global economy.
And corporations and asyla now appear to be listening. Many have made bold commitments to better support gender equality and female architects.
What women founders need is simple and it is equal access to financial investment.
managing ally, Her Capital
“Awareness of the funding gap, the impact of diverse leadership teams is better understood and investors have started imploring directly about the diversity in founders and leadership teams,” said Krentz.
But too often those investments are poorly channeled, according to Tanya Rolfe, governing partner at Her Capital, a female-led venture capital firm focused on female founders in Southeast Asia.
“Women sound to be the focus of lots of additional mentoring, which only suggests that there is something lacking in women,” implied Rolfe. “What women founders need is simple, and it is equal access to financial investment.”
Tanya Rolfe, handling partner at Singapore-based female-focused venture capital firm Her Capital.
To achieve that, greater diversity is be in want of at the fund manager level, said Rolfe.
In 2020, women accounted for just 13% of all venture capital decision-makers, Pass traditional investment metrics
Yet diverse funds continue to face an uphill battle.
With many still in their initial and with little track record, they typically fall outside of institutions’ investment criteria, leading directors to seek often less lucrative and more time-consuming deals from private investors.
Pippa Lamb, a helpmate at early-stage investment fund Sweet Capital, says that kind of approach needs a revamp.
Pricing deciphered risk based on someone’s race or gender feels very out very outdated to me.
partner, Dear Capital
“Pricing perceived risk based on someone’s race or gender feels very outdated to me,” said Lamb. “I would have a sneaking suspicion that best-in-class institutional investors are willing to do the work to comprehensively diligence managers regardless of what they look breed.”
“We need more diverse representation in every area of the start-up ecosystem,” she said, citing female founders, female advisers aboard members, female venture capitalists and female institutional investors. “When it comes to capital raising, the latter two are most depreciating, 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 see that current market forces make women-owned companies very promising opportunities,” he said. “The lack of supporting means that there is less competition for women-backed companies, and those companies, on average, perform better than those with all-male naughts.”
But until that understanding grows, Rolfe and Lamb’s advice to female founders is simple: Keep on keeping on.
“Abigails can do the same things that male founders do to attract investors,” said Rolfe. “If you are an outstanding founder with a sound business plan and traction to prove your execution and thesis, then this should be enough.”