Elaine Kunda was the CEO of two tech companies. But it wasn't until she'd exited those companies, and was considering becoming an angel investor, that she understood how hard it was for women entrepreneurs to raise money. She'd see smart pitch decks from women, but the companies never seemed to get funded. Instead, similar companies, founded by less-promising men, would rake in dough. "It was weird," she says. "The women were way more competent, capable, and further along in their businesses." By 2018, Kunda knew the time was right to do something about it. She launched Toronto-based Disruption Ventures, a fund that will invest $500,000 to $1 million in about a dozen women entrepreneurs.
Kunda is targeting $30 million for her fund, and has so far closed on $13 million. "Some of the larger L.P.'s are starting to say we can't walk into a room and have only dudes at the table," says Kunda, referring to the limited partners who provide the money that venture capitalists invest. "Adding token women won't solve that."
While there are only a handful of women-focused funds in Canada, Kunda has plenty of company south of the border, in such cities as Austin and Boston, and, yes, in Silicon Valley. Jenny Abramson helms one of the largest: The $112 million Rethink Impact, a fund that works out of New York City, Washington, D.C., and San Francisco, and invests in women-led tech companies looking to make a social impact. Then there's Karmijn Kapitaal, the first fund to bring a women-focused model to Europe, and even Mindshift Capital, a relatively new fund in Dubai.
Kunda and her colleagues are tackling a huge problem: It's well known that women CEOs get about 3 percent of venture capital globally, and that black women CEOs get significantly less: 0.2 percent. Gender-diverse teams--maybe just one woman on a founding team that is otherwise all-male--get just 17 percent of venture capital dollars.
And as entrepreneurs, women, in general, perform pretty darn well. First Round Capital found that founding teams with at least one woman outperformed all-male teams, when measured by their companies' gains in valuation, by 63 percent. Boston Consulting Group, looking at companies that had been through the Mass Challenge incubator, found that, at the early stages, for every dollar raised, women generated 78 cents in revenue, versus 31 cents for the men.
In these terrible numbers, women such as Kunda see opportunity. If women are getting so little funding, but at the same time are at least as capable in entrepreneurship as the guys are, then women entrepreneurs represent an overlooked and potentially lucrative market. Inc. estimates that approximately 57 funds have been started to invest just in women and women-led companies. Collectively, they represent more than $1.5 billion. They all can be found in Inc.'s Fundery, a new, searchable database that enables women to find funds that are actively looking to invest in them, regardless of their location or funding stage.
Most of these are first-time funds, many from women who have track records in investing but haven't helmed their own funds before. Among the top venture funds, only about 8 percent of investing professionals are women, but among funds that invest specifically in women, nearly all have a female founding partner--or a team of them. (The exceptions tend to be black men: Harlem Capital, which was founded by four black men and invests in women and entrepreneurs of color, and New Voices Fund, started by Sundial Brands co-founder and CEO Richelieu Dennis).
Because so many of these are first-time funds, they tend to be a lot smaller than funds from the big players in the venture capital old-guard. With long track records and investors who've become fixtures in Silicon Valley, the old guard can often raise a $500 million fund, and even a billion-dollar fund raises only one eyebrow. But for a first-time fund from a relative newcomer, $5 million is more than respectable for an early-stage fund. Some of these newcomers, such as Female Founders Fund started by Anu Duggal, have successfully gone on to raise second funds that are significantly larger.
While Silicon Valley is the undisputed epicenter of venture capital, when it comes to funds that invest in women, the landscape is a lot different. Rather than take their cues from an industry that's never been inclusive toward them, women are starting funds wherever they see opportunity. Sometimes that means Silicon Valley, but not often. Out of 56 funds that invest specifically in women, only seven are based in San Francisco or Silicon Valley. Instead, these are funds in New York, Boston, Los Angeles, as well as other cities such as Austin, Minneapolis, and Boulder.
The largest fund for women entrepreneurs may very well be the Business Development Bank of Canada's Women in Technology fund, a $200 million fund based in Toronto. The U.S. funds have been led, sizewise, by Intel Capital Diversity Fund. At $125 million, it is fully invested, and Intel now invests out of one pool of money for all entrepreneurs. But Rethink Impact, in Washington, D.C., New York, and San Francisco, is operating out of a $112 million fund. Merian Ventures, which invests in companiesacross all stages from New York and London, is right behind it at $100 million; as is Amityville, New York-based New Voices, which also leverages $100 million and invests in women of color.
Most of these funds are still too young to have assembled the kind of track records that make investors clamor to get into the next fund. But many have seen their companies go on to raise later rounds, which is certainly an important milestone. Meanwhile, the success of companies such as Stitch Fix and nVision Medical keep the flywheel turning--inspiring female entrepreneurs to create new companies, and women investors to stand behind and support them.