Investing in Women Founders: The Pandemic's Impact

The Pandemic's Impact on Women and Venture Capital

The COVID-19 pandemic undeniably triggered widespread disruption across communities, educational institutions, and the global economy, with significant repercussions for professional lives.

The effects of the pandemic were not felt equally; women’s careers experienced a disproportionate impact. They were found to be 1.8 times more likely to face layoffs compared to their male counterparts. Simultaneously, the demand for at-home childcare solutions increased substantially.

Career Interruptions and Funding Disparities

Historically, women have often shouldered a greater share of domestic responsibilities. Consequently, they were twice as likely as men to leave their jobs to provide childcare during the pandemic. Data from 2020 also indicated a notable decline in venture capital (VC) funding directed towards companies led by women.

In 2019, approximately 2.8% of VC funding was allocated to women-led startups, representing a peak investment rate at the time. However, Crunchbase statistics revealed a drop to 2.3% in 2020. This seemingly small decrease, in reality, represented a setback of five to ten years for women’s advancement in the VC landscape.

Creating Opportunities in a Challenging Environment

Many women within the venture capital sector recognize that proactively creating opportunities is more effective than passively awaiting them. As a seasoned investor and founding partner, I’ve encountered diverse investment prospects. While building my own opportunities through fund creation, I’ve remained keenly aware of the challenges women in VC have faced during the pandemic.

Prior to 2020, women were steadily gaining ground in VC. By 2019, they comprised nearly 12.4% of all decision-makers at US venture capital firms, a rise of 3.5 percentage points from the previous year. Despite this progress, decision-making power wasn’t universally distributed. An Axios analysis showed that only 34 out of 351 US VC firms had two or more women in decision-making roles.

A Strategic Path Forward

Despite these hurdles, I firmly believe a collaborative and strategic approach can foster greater opportunities for women in the post-COVID era.

The Growth of Venture Capital and the Need for Diversity

The venture capital industry is experiencing rapid expansion. In my hometown of Houston, Texas, VC investment has tripled in the last four years, increasing from $284 million in 2016 to nearly $800 million in 2021.

This substantial growth necessitates a diverse talent pool to ensure sustainable, long-term investments. As an Asian woman in this field, I deeply understand the difficulties associated with breaking down barriers in venture capital.

Empowering Diverse Teams

My commitment to empowering individuals from all backgrounds, particularly women, led me to assemble a diverse team of experts, with 90% representing various ethnic backgrounds. Investing in diversity yields improved results in both revenue and representation within the VC industry.

Women venture capitalists with decision-making authority are twice as likely to invest in diverse, women-led startups. Their unique experiences allow them to identify overlooked problems and accurately assess market size.

The Value of Women-Led Startups

Investing in women can significantly increase the likelihood of a women-led firm achieving breakthrough success and establishing a category-defining company. A Kauffman Fellows study revealed that startups receiving funding from women-led teams generate revenue rates nearly twice the value of the initial investment.

Facing more frequent rejection, women are often compelled to develop more robust and detailed business plans. Throughout their careers, women demonstrate increased resilience, adaptability, and innovation – qualities highly valued in venture capital.

Positive Ripple Effects

The Kauffman Fellows study also indicated that women founders and VC professionals are twice as likely to hire women for their startup companies. These companies also attract individuals seeking to make a positive global impact and prioritize strong employee relationships.

Startups with both male and female founders are nearly six times more likely to hire female staff.

Addressing Systemic Barriers

Creating opportunities for women in venture capital, even in a post-COVID world, requires more than simply supporting women-owned businesses. It demands challenging and dismantling the ingrained myths, biases, and thought patterns that hinder investment in women-led startups.

Focusing on Human-Centered Models

A key approach is prioritizing human-centered business models. These models excel by addressing societal needs, such as creating jobs, enhancing employee satisfaction, and fostering supportive work environments that promote career growth.

Taking Risks and Investing in the Future

Venture capital is inherently a high-risk industry. Success requires courage, empathy, intuition, determination, and resilience. While profitability is never guaranteed, my experience has consistently shown that embracing risk drives innovation and progress.

It’s time to take a risk on women and invest in a brighter future for venture capital.