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7 Female Founders Discuss Gender Bias in Fundraising

By Leah Kinthaert

With the number of female Fortune 500 chief executive officers dropping by 25% last year and the dire prediction that women will not “achieve gender equality at the top for another 100 years”, the idea of founding ones own company is becoming increasingly attractive to women. In fact in a recent study of female millennial entrepreneurs “90 percent left their job in the corporate world to start their own business”. Unfortunately, having left their glass ceilings behind in the corporate world, these women often find themselves once again facing sexism, this time when it comes to funding. In fact, recent analysis says the female founder experience may actually be worse than the experience many of them left behind in corporate jobs, with “particular barriers exist(ing) for women in entrepreneurship beyond those already faced in related fields.”

According to an article by the Harvard Business Review, women make up half the US workforce and own 36% of small businesses but are only 9% of the entrepreneurs in “venture capital-financed, high-growth technology startups”. Pitchbook data shows that in 2018, just 2.3% of total capital went to women entrepreneurs. Black women receive just .2% of funding relative to men, a number which VentureBeat explains is “especially staggering because black women are the fastest-growing group of entrepreneurs in the nation… 60 percent of all black businesses are owned by women”. However, many women are defying the odds to thrive in this exceptionally challenging environment; these women are working hard to pave the way so the road will not be quite as bumpy for the next generation.

To get some insight into the real life experiences of these women, I asked seven female founders to share their opinions on whether or not gender has been an issue in securing funding. From fintechs to a modern day matchmaking service, the busy entrepreneurs I had the privilege of speaking with have developed truly innovative products and services, and they include: Fran Dunaway, CEO & CoFounder, TomboyX ; Dr. Roshawnna Novellus, CEO & Founder, EnrichHER; Talia Goldstein, Founder, Three Day Rule; Kathryn Petralia, Co-Founder, Kabbage; Kristen Carbone, Founder, Brilliantly, Dawn Dickson, Founder & CEO, PopCom and Dewan Farhana, Founder and CEO, Betternest.

Women Founded Companies Uncover Hidden Opportunities

In the WSJ In the Elevator With series, Anu Duggal of Female Founders Fund described one of the biggest roadblocks for women Founders: “Women who are pitching companies that focus on the female consumer to a primarily male audience, there’s still a disconnect, you’re pitching someone who doesn’t use that product, hasn’t really thought about it”. Fran Dunaway, CEO & CoFounder, TomboyX, has experienced this disconnect firsthand: “We were focused on making comfortable underwear for every body and the majority of people we pitched to, not all of them men, underestimated the opportunity. They tried to put us in a niche category of ‘lesbian underwear’ and at times, wondered what was wrong with Victoria’s Secret. They didn’t comprehend the underlying messaging that is such an important part of our brand, and the part that is resonating in such a timely manner.”

These particular investors apparently have missed all the reports that shares in L Brands, Victoria’s Secret’s parent company, go for around $25 now and were worth $100 four years ago; they are ultimately leaving a nice big niche for the ones who do see business opportunities in unmet needs.

When I asked Dunaway if she thinks being female made things more difficult for her to get funding, she had this to say: “I absolutely think that gender made it more difficult to raise investment. Let’s be clear, I had all sorts of strikes against me: first time founder, over 50, female, lesbian, in a relationship with my co-founder, no experience in the industry. So I totally get it.”

Venture firms dedicated to funding women are growing, and in fact 38% “of female founders seek out female investors”. Dunaway was able to benefit from this burgeoning phenomenon of women funding female entrepreneurs: “In the end, we’ve raised from amazing people, 85% of them women. Because they recognized that we have a ground swell of opportunity within demographics that are typically ignored in the fashion industry. We’ve chosen to start at the foundation, their underwear. When you think about it, there are a whole lot of us out there that have felt excluded from an idealized perception of beauty. For TomboyX, the focus is on feeling comfortable in your own skin.”

Different Expectations for Male and Female Founders

Dewan Farhana, Founder and CEO of Betternest had this to say: “Women definitely face more difficulty in securing funding compared to male peers, which is not just confirmed through statistics but something that is discussed in many female founder experiences and forums. I think one issue of conflict is that as women, we tend be very fact, number and evidence based, and in many cases that is also what is expected from women. And when it comes to big, bold startup ideas, it’s difficult to have all of the numbers developed and published when you are in the early stages, even though the idea has a lot of potential.” A Harvard Business Review study verifies that indeed women get asked very different questions from both men and women VCs. Sally Hersips writes: “When men pitch startups they get asked how they’ll make money. But women get asked about how they’ll prevent losing investor’s money.”

Farhana advises women to lose their fear and be more bold. She explains: “Investor Elizabeth Yin stated in her blog ‘In running [an LP backed fund], I need to make big big bets that could either go nowhere or be the next Google. Entrepreneurs often complain about why VCs seem to make stupid investment decisions – i.e. pass on profitable growing businesses but bet big on companies that make you wonder what people are smoking. This is where these decisions come from.’ And this is a really great point. It’s not always that investors don’t believe in women, but they are aiming to fund the huge unicorns and I think investors do need to reflect on their unconscious bias and see that women can build these amazing companies; but for women founders as well to not be afraid to share bold visions even if it makes us uncomfortable to do so without having all of the numbers achieved in the early stage.”

Their Rejection is My Protection

Dawn Dickson, Founder and CEO of PopCom, is the “first black Founder in history worldwide to raise the highest secure token offering (STO) crowdfunding round from the general public.” Dickson has not let any difficulties securing investment discourage her, but instead has used individual manifestations of bias as a handy measurement tool for judging character. Dickson explains: “Statistically as a black female founder I have had more difficulty securing investment than my male peers and female non-minority female peers, however I have never let that discourage me from pursuing funding. I believe a lot of this has to do with the traditional lack of diversity in the investor community. The lack of representation contributes to the challenges myself and other founders of color have faced. We are experiencing a shift as more investors of under represented communities are starting to create funds and work to disburse the capital more evenly.”

Dickson continues: “I have experienced indirect discrimination, no one has said ‘I will not invest in your company because you are a black female’, however they have questioned my abilities and credentials where they would not question my white male or female counterparts, they have told me that they don’t invest in my category of business then I will see them invest in the same type of company led by a white founder. I don’t let this discourage me, their rejection is my protection because I do not want to align myself with narrow minded individuals of that character. I have great investors who see me for who I am, a strong founder with a scalable company, regardless of race or sex, and those are the people I want on my cap table.”

Blazing the Trail For Future Founders

The accounts of women’s experience with bias from male venture capitalists seem unbelievable at times – leaving one to question the era these stories are occurring in – but unfortunately they are part and parcel of doing business while female in the 2010s. Talia Goldstein, Founder, of Three Day Rule got a particularly disturbing lesson in gender bias while fundraising. Goldstein recounts her story: “In 2012, I was in the middle of fundraising for my dating startup Three Day Rule, when I found out I was pregnant. Because of feedback from advisors and investors I made the very difficult choice to hide my pregnancy to successfully close our seed round. After we successfully closed the round, I publicly spoke out about the gender divide and bias against women in the startup space.

In 2015, when we were ready to begin raising another round, I found out I was pregnant with my daughter. This time, I decided I would not hide my baby bump. We went on to raise even more than we had set out to, but as I wrote later in Fortune, ‘there is a disturbing pattern to who did—and who didn’t—invest. Not one investor who met me in person while I was pregnant ended up putting money into the company. Everyone who said yes either spoke to me over the phone, knew me from before, or met me after I had the baby. It was as if the physical sight of a pregnant woman deterred investors from joining the round’.

With 400% year-to-year growth, I had shown that, pregnant or not, I was dedicated to leading my company. However, I could tell the other people in the room, who were always mostly men, felt uncomfortable with a pregnant Founder. In every in-person meeting, my pregnancy was mentioned, and investors seemed to dwell on it.

The only way to end this stigma is for more women to become part of the process – founding companies, investing, and fundraising all while having a family. I can confidently say is possible to do both: to be a great mom and to run a successful startup. The more we talk about our experiences and stand for what we believe in, we blaze the trail for future female founders.”

A Light at the End of the Tunnel

Recent study by Boston Consulting Group showed that “startups founded and cofounded by women are significantly better financial investments” because “for every dollar of funding, startups founded by women generate 78 cents, while startups founded by men generated less than half, at only 31 cents.” Investors are indeed beginning to see the light, as Kathryn Petralia’s experience shows. The Co-Founder of Kabbage, a fintech startup valued at more than $1.2 billion, has found her gender to be an asset. Petralia explains: “Gender has not been an issue – if anything I would say it has been an advantage to be a woman in my industry these past 10 years. I’ve been fortunate to be surrounded by men in business who value diversity and have sought me out because of it. In the last 4-5 years in particular I think the tide has shifted and men have begun to realize the importance of having all kinds of people at the table. Not just because they should but because it’s better that way. Better input, better decisions, better outcomes.”

Keeping Your Cool

The stories of these women have indeed shown that although no two experiences are the same, female founders are having an unprecedented effect in the business world. The ultimate hope is that someday raising funds will be a meritocracy, not clouded by irrational biases. Kristen Carbone, Founder of Brilliantly is keeping her cool until then: “I believe that, even though I didn’t want to admit it, there are inherent gender biases that acutely reveal themselves during the process of building a business. I’ve had potential investors ask questions like if my children are my priority, why I am divorced, and other questions that I’m fairly certain male founders don’t get asked. I’ve also had an someone offer to try and negotiate a deal for me on the golf course, because that’s where deals get made and I don’t play. While I find this very frustrating, I try to keep my cool and answer (or skirt answering) any questions that come up.”

Carbone is one of hundreds of female founders whose mission is to empower an underserved segment of the population – in Brilliantly’s case women who have had mastectomies. She describes her company: “Brilliantly exists to do three things: improve women’s feelings of ease through thoughtful products and services, share practical wisdom and a community of support, and amplify stories of radiant women whose lives have been impacted by breast cancer. Our first product addresses the persistent, uncomfortable, and distracting cold feeling that many women with implant reconstruction experience and launches this fall.”

Making the Change

Dr. Roshawnna Novellus, CEO & Founder, EnrichHER, is in the vanguard of changing the equation when it comes to making capital available for female founded businesses. Dr. Novellus explains: “As a female entrepreneur, I was told ‘no’ more times throughout my career than I can count. That is precisely why I started EnrichHER. I was fully aware of the gender gap due to personal experience, and I wanted to make sure that women in my shoes 10-20 years from now would never have the same issue. I was done with hearing comments such as ‘women don’t ever have any good ideas’ or ‘women can’t run a business’. History shows that for decades, stereotypical white men dominated the business world. Women were instantly marginalized by the proverbial glass ceiling. We’re here today changing that, creating new avenues for women who seek capital funding”. EnrichHER’s fintech platform connects profitable, women-led businesses to lenders who want to fund and invest up to $250,000.


Photo credit: Pixabay.