Diversity Health, Wellness & Biotech Public Markets Venture

Something Ventured: Life Sciences And Health—Where IPOs Happen Earlier—Have More Female Founders

Editor’s note: This article is part of Something Ventured, an ongoing project by Crunchbase News examining diversity and access to capital in the venture-backed startup ecosystem. Read more about the state of funding to female founders in 2021 here, and access the full Something Ventured project here

The share of venture funding to U.S. startups with solely female founders has languished in the low single digits for years, and fell even further in the first eight months of this year, to 2.2 percent. 

While that figure is obviously far too low, I also wanted to examine the role of life sciences and health startups in those figures, since female founders tend to see a somewhat higher representation in those sectors than in the general tech sphere. 

In the first seven months of 2021, for instance, the two largest funding rounds for companies with one or more female founders are biotechs, and six of the top 10 are bio- or health-related.

This opens the door to one potential argument for why the female founder funding numbers may be very slightly less dismal than they first appear.

Here goes: Biotech companies regularly go public at an earlier stage than tech startups. Commonly, they see tapping public markets as a fundraising strategy rather than an exit, and use the proceeds to fund clinical trials. 

So, if we see proportionately more female founders in biotech than in tech (and we do), one could argue that these founding teams are getting more in early- and later-stage investment than the venture stats suggest. 

That’s because investment for early- and later-stage milestones often comes from public investors, not private ones.

Let’s take Caribou Biosciences, which went public in late July, as an example. The Berkeley, California-based company, a clinical-stage CRISPR-focused biopharmaceutical company, counts Jennifer Doudna as a co-founder.

It’s a name any biotech investor should recognize. Doudna, co-recipient of the 2020 Nobel Prize in chemistry, is credited as one of two scientists who discovered CRISPR gene editing, widely considered one of the field’s biggest research breakthroughs in a generation. With that track record, one might expect any startup she launches to have an easy time getting funded.

In fact, Caribou has raised more than $150 million in venture funding, culminating in a March Series C. It went public a few months later, raised around $300 million, and was recently valued around $1.4 billion. Another startup Doudna co-founded, gene-editing technology company Editas Medicine, followed a similar trajectory, going public after Series B and raising hundreds of millions in post-IPO financing, with a recent market cap around $4 billion.

Editas’ and Caribou’s trajectory isn’t uncommon for a venture-backed biotech. However, it is a contrast from your typical tech unicorn IPO in which founders typically raise really big rounds at Series D and beyond before IPO. The biggest 2021 venture-funded tech IPOs—Robinhood, Coinbase and UiPath—got to Series E and beyond with billions altogether in private funding before going public.

Why the difference in approach? One reason is that tech companies tend to have large and growing revenue by the time they go public. The longer they stay private, the larger their revenue and valuation will be when they go public.

Biotechs, by contrast, tend to be pre-revenue when they go public. Virtually all lose money—commonly tens of millions of dollars a year—and Caribou is no exception. Thus, going public isn’t about showing off revenue growth but rather about generating public market enthusiasm around one’s research and raising enough to fund clinical trials. 

So, most newly public biotechs are basically still functionally early-stage or middle-aged startups, even if they’re getting funding from public markets.

Does that mean the stats about funding to female founders shouldn’t seem that shockingly low? No. Even taking early biotech exits into account, they’re still really, really low. 

In fact, the above is not intended to dissuade the reader from concluding that female-founded companies are getting too small a share of venture funding. 

— Gené Teare provided data and analysis for this story.

Illustration: Dom Guzman

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