Diversity IPO

The Market Minute: A Historic Year (So Far) For Woman-Led IPOs, But There’s A Ways To Go

Illustration of a board game in the style of Chutes & Ladders named The Market Minute.

It’s been a record year for women-led companies going public, but there’s still a lot of progress to made made if we want to achieve gender parity in the world of startups.

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Whitney Wolfe Herd became the youngest woman to take a company public when woman-centric dating app Bumble had its initial public offering earlier this year. Also in 2021, direct-to-consumer health care apparel maker FIGS became the first company founded by two women to go public. Most recently, Rent The Runway, which was founded by Jennifer Hyman and Jennifer Fleiss filed confidential paperwork to go public. 

Business Insider published an excellent story last year analyzing the record of woman-led startups to go public. They found that although hundreds of startups go public every year, only 20 currently traded companies were founded and led by women. Last year, of the 442 companies to go public by mid-December, only four were founded and led by women, the analysis found. 

That got me thinking more about the subject, and I began to notice the number of companies founded by women that have filed to go public this year. 

This year’s already on pace with last year, with Bumble and FIGS’ IPOs, along with 23andMe’s SPAC deal and Rent The Runway’s upcoming IPO. Video-sharing website Vimeo also went public this year with Anjali Sud as its CEO, and cannabis startup Leafly recently announced its plans to go public through a SPAC — Vimeo and Leafly’s respective CEOs, who are women, aren’t co-founders of the companies.

There are a lot of reasons so few women who have founded companies have taken them public. But it more or less comes down to the fact that women face more obstacles when it comes to a critical part of a startup’s lifespan: the growth stage.

One of the biggest challenges women entrepreneurs face is at the growth stage when it comes to scaling their businesses, according to Lakshmi Balachandra, an associate professor of entrepreneurship at Babson College, whose research focuses on the impact of trust and gender in receiving business funding. 

Balachandra pointed to a recent study that examined if there were gender-based challenges for entrepreneurs trying to scale their business. The researchers interviewed 30 women who all ran businesses with revenue above $5 million.

“What was honestly so surprising and depressing was that women still face funding challenges,” Balachandra said. “The financing of the later stage, late-stage venture capital, and private equity is almost no different from the early stages where women are still faced with conversations being very different from the ones men have to deal with.” 

Balachandra, who previously worked in venture capital, noted there’s an implicit bias to what investors find “fundable” or businesses that they believe have a large market and can grow. 

In addition to the assumptions investors could make about businesses, women also tend to receive questions around their competency and ability to scale a business.

“The inherent feeling that women expressed over and over again were the challenges they faced in private equity, later-stage funding,” Balachandra said. “The other part was still feeling left out.” 

The challenges women face at the earlier and growth stages of a company continues to affect the company when it reaches later stages, she said. 

“Because you’re not, as a woman entrepreneur, getting the venture rounds … you’re having to grow your business underfunded,” Balachandra said. “You don’t have the money to scale quickly. And then you’re going to later-stage investors and you’ve done everything right, you’ve scaled, you’ve grown, and people are saying, ‘How come it took you five years? Why haven’t you done this market? Why haven’t you done that?’ When you didn’t have the money to do that.” 

There’s starting to be more parity at the top of the funnel, according to Rhonda Shrader, executive director of the University of California, Berkeley’s Haas Entrepreneurship Program. More women are starting companies and thinking about entrepreneurship. But the challenge is still when it comes to scaling a company, investors tend to go with what they know, she said, although there’s been a push to change that.

“I think growing them to the point where they can go to a public market or get acquired (is the challenge),” Shrader said. “There’s some reticence of some funders to give to folks they haven’t before.” 

Illustration: Dom Guzman

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