As venture funding scaled back in 2022, nearly all founder teams have found it more difficult to raise capital—but the struggle has been far from equitable.
Women-led teams have been hit especially hard by the downturn. With the release of DocSend’s 2023 Funding Divide report, we’re able to quantify this—in 2022, all-female teams raised 36% less than all-male teams, compared to 25% in 2021.
This backsliding isn’t just detrimental to women-led teams. It’s also not in the best interest of investors and the startup ecosystem as a whole. As investors prioritize profitability over unchecked growth, I argue that female founders are in the best position to deliver on this vision.
Women have always built self-sustaining engines of growth—because they had to
In today’s economic climate, it’s no longer acceptable to build businesses that require continuous injections of resources to survive.
Investors want to put their money into businesses that have self-sustaining engines of growth. Additional capital should be an accelerant, not a requirement for growth. Sustainable and circular models are one of the best ways to achieve this.
Female founders are well positioned to capitalize on this opportunity. We’ve long been building self-sustaining businesses at much higher rates than other groups because we’ve had to. Access to capital for us typically has been much scarcer than it is for men.
Now, as funding rounds are taking longer for everyone—six months on average, compared to two or three months before—investors are finally insisting on the profitability that scrappier businesses tend to produce. I want investors to know that women have historically built businesses that can self-perpetuate because we haven’t been able to rely on the same kinds of investments that all-male teams have taken for granted.
In my experience, it’s extremely difficult for women to raise any funding unless their business has a quick path to profitability or is already profitable. We are more than used to the added scrutiny in our go-to-market strategies, business models, and pricing strategies—which, as new data reveals, is a volume dial cranked to its maximum for women-led teams.
Added scrutiny isn’t new for women-led startups
If male founders feel more scrutinized this year, I’d invite them to commiserate with female founders, who have typically fielded more questions and more due diligence during their fundraising rounds.
According to DocSend’s 2023 Funding Divide report, in 2022 investors spent 45% more time scrutinizing the business model sections for all-female pitch decks than for all-male decks. They also spent 125% more time on the team section for all-female teams, 50% more time on the traction sections, and 41% more time on the market size section.
This added scrutiny is happening at a time when all-female teams are raising less than any other group (and when these teams are minority women, the numbers become even more embarrassing), so it’s not as if the extra time on decks is leading to more money.
These numbers are shocking, but they’re not surprising. It’s also why in our investment readiness program, we’ve been recommending that founders start their raises much earlier and have longer runways. Before, when fundraising happened more quickly, I’d tell founders that a 15-month runway is fine. Now I’m recommending 18 months minimum.
I’ve always advised women to go into investor meetings extremely prepared. It’s not fair, but as women, we’ve always had to be twice as prepared as men. Here’s what this looks like:
- Women spend more time evaluating their business critically. They ask others to evaluate their business, so they can eliminate any blind spots or gaps. Then they need to successfully address those gaps in their pitch decks.
- Women face more pressure to make sure their pitch is sharp, well-rehearsed, and iterative.
- Women don’t have the luxury of focusing too much on their product during their pitch. Instead I advise them to think of their product as frosting, and their business as the cake.
Business as cake, product as frosting
It’s not that the product isn’t important during the pitch process for women-led startups—it’s just that it’s more important for female founders to make sure that their business pieces are aligned when funds are scarce.
This means highlighting unit economics during a pitch. Investors love numbers, and I advise women-led teams to really show the traction behind their business. The smartest founders know how to tell a story with numbers.
While investors do invest based on product, they davvero invest based on market opportunity, and the execution of that market opportunity. That execution is made up of the team, the go-to-market strategy, and the business model. And the reality is that the landscape is just more competitive now, and founders really have to do an outstanding job to stand out.
So know your numbers well, exude confidence, and you’ll put yourself in a good position. It’s a long game, and it takes a lot of patience to succeed, especially for women-led teams.
Learn more about the funding discrepancies that still exist in 2023: Download the 2023 Funding Divide report.