By Christine Tsai, CEO and founding partner of 500 Startups. Since the firm’s inception in 2010, Tsai has grown 500 startups to $600 million in committed capital1, 2,400-plus portfolio companies and a vibrant community of 6,500-plus founders spanning more than 75 countries around the world. Tsai has spent her entire professional career in Silicon Valley, building tech products and investing in early-stage startups.
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Here’s a snapshot of some of the headlines I wake up to: “Businesses owned by women and minorities have grown. Will Covid-19 undo that?” “Nearly 60% of people who have lost their jobs due to the coronavirus pandemic are women” and “Why this Economic Crisis Differs from the Last One for Women.” (Hint: It could be worse.)
Unfortunately, the economic fallout of COVID-19 will disproportionately affect women. For female-owned businesses, it will most likely be a struggle to access capital at a time when small businesses need more runway. Already, female entrepreneurs get roughly one-third less in small business loans than male entrepreneurs, so it’s no stretch to assume these numbers will not magically improve during an economic crisis. Women will have less access to small business loans and, if approved for loans, smaller amounts to keep their businesses afloat.
As the government scrambles to send out stimulus checks, women will face financial strife sooner than men. Furthermore, the burden of family care usually falls on women, which means less time to dedicate themselves to business. Ironically in all of this, 76 percent of the health care workforce is female, putting many more women than men on the front lines to fight COVID-19.
After making small strides, this could mean a setback for female founders. Even though investment in all-female founding teams was only 2.7 percent of capital invested last year, venture capital investment in all-female founding teams rose 10 percent between 2018 and 2019 to $3.3 billion–up from $2.1 billion in 2017. Teams with both male and female founders received 12 percent of the VC deals in 2019.
Although the needle was moving slowly, it was moving. There were more female-founded unicorns in 2019 than ever before, 22 in total, up from 15 in 2018, and Crunchbase reported that 20 percent of global startups raising their first round of funding in 2019 had a female founder. There are many clear benefits of a diverse team–one of which is that they generate more revenue, which, during an economic crisis, is incredibly important.
Let’s not forget the value of diversity
A Boston Consulting Group study looked at 350 companies that went through the MassChallenge program. Female-founded teams raised less money, but generated more revenue and quite a stark difference at that. For every dollar raised, female-led startups generated 78 cents in revenue, and male-led startups generated 31 cents in revenue. First Round Capital had similar findings, noting that companies with a female founder performed 63 percent better than companies made up of all-male team members.
Diversity in age and ethnicity is just as important for innovation. Varied backgrounds and experiences arguably lead to a team that better understands people and the needs of its customers. With the uncertainty surrounding the COVID-19 crisis, startups must focus on their customers, now more than ever.
Part of the reason female-led or female co-led teams receive less funding is that the decision-makers are almost all male. In U.S. VC firms, less than 10 percent of the people who actually write the checks are female. Despite a slight increase–up from 7 percent in 2017–venture capital is still largely male-dominated.
We have to keep pushing for change.
With the COVID-19 crisis, we must work to propel the number of funded female-founded companies upward. To that end, 500 Startups has created 500 Female Forces and invites all of you to renew commitments to female founders. We’re giving a formal call for leaders, investors, mentors and experts to make a pledge to support female founders in whatever way they can.
At 500 Startups, our pledge includes:
- Increasing the percentage of female founders in our accelerator. We strongly feel that with our new rolling admissions accelerator model, more female founders will have the flexibility to apply to and attend our program.
- Increasing our global outreach to find the best female-led companies.
- Offering more resources for female founders, including access to mentors, advisors and investors that have a specific interest in helping female entrepreneurs.
How you can get involved
We invite investors, organizations and communities supporting female founders to add themselves as a resource www.femalefounders.500.co We also encourage female founders to apply to our new accelerator platform and join us on social media to discuss how the startup community can help them and share their stories of resilience.
There are many uncertainties about what the future holds, but what we choose to do right now matters. Let’s do our part to help maintain the progress female founders have made.
Illustration: Dom Guzman
Approximated as of Dec. 31, 2019, across the entire 500 Startups family of funds.↩
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