World Entrepreneurs’ Day – female-founded firms on up in US

Cause to celebrate on World Entrepreneurs' Day – female entrepreneurship is growing fast with women starting 49% of new businesses in the US in 2021

Female entrepreneurs are rising rapidly, with women starting almost half of startups in 2021, according to research by HR cloud software company Gusto. This marks a huge increase from the 28% of women starting new businesses in 2019.

In fact, 5.4 million new businesses were formed in 2021, reports Gusto. This is an historic high, made even more impressive by the fact that it happened while the country remained in the midst of a once-in-a-century pandemic.

Seizing a ‘pandemic related opportunity” was the biggest reason for women starting new businesses in 2021, with Gusto research finding that a staggering 40% of female entrepreneurs launched startups as a direct result of the pandemic.

Pandemic offered opportunity for women to find new income source

When the pandemic hit, women were disproportionately impacted both by job loss and burnout as they juggled work and caregiving demands. In 2020 alone, women lost more than 64 million jobs, equalling 5% of the total jobs held by women, according to Oxfam International, compared to just 3.9% of men’s jobs that were lost.

In the US, more of the nation’s 6.6 million jobs gained since President Biden took office in November 2020 have gone to men, according to the Labor Department. As of early February 2022, there were still 1.4 million fewer employed adult women in the workforce compared to 500,000 fewer adult men.

Simply put, women left the workforce early on in the pandemic, and at greater rates than men, and they have been more reluctant to return.

Not surprising given that women dominate some of the hardest-hit sectors, including retail and hospitality, and those sectors suffering the highest levels of stress and lowest levels of pay like childcare and nursing.

This has fuelled a rise in women deciding to take control and secure income and flexibility by starting their own businesses. In fact, flexibility to work from home and be there for their families has been a significant driver in female founding activity.

In a 2021 survey by U.S. job search company Jobflex, 68% of women said they wanted to continue working 100% remotely once the pandemic ended, and 60% said they would leave their current position if they couldn’t do so.

Funding and support for female-led businesses is growing

While Gusto research found there was a significant reliance by women founders on personal savings to start their businesses (61%), more female founders are getting funding to grow.

While women-led companies secured just 2% of VC funding in 2021, according to Pitchbook analysis, new research shows that change is happening.

Research from the 2021 Annual Review of Funding for Female Founders found that in 2021, female-founded startups in the US raised US$54.6bn from 3,871 capital-funded deals, representing a 146% YoY increase, compared to 2020 figures.

And female-founded unicorn businesses are rapidly rising too, with 2021 figures showing a 4X increase in the number of female-led companies reaching US$1bn status.

Not only are more VC firms allocating investment to women-led funds, but there is a growing pool of female angel investors and general partners actively looking to support female founders and help catapult women-led startups to success.

Today, women make up 15% of general partners at VC firms, up from 12% at the end of 2019.

Venture capital firms backing female founders

Among these are big names like former Tennis champion Serena Williams, who, with her early-stage VC firm, Serena Ventures, has raised initial funds of US$111m with more than half (53%) going to female founders.

Serial entrepreneur, angel investor, and Forbes Under 30 list alum Jaclyn Johnson is another woman shaking up the VC industry. Founder of successful startup Create & Cultivate, an online content and event series, Jaclyn recently launched a VC firm and brand incubator prioritising women-led or women-founded organisations.

With New Money Ventures, “we are empowering the next generation of women leaders with not only expertise but capital,” Jaclyn says.

Here are five more US-based female-focused VC firms:

1. Female Founders Fund (FFF) – New York-based seed-stage venture fund that invests exclusively in female-founded startups, spotlighting category-defining businesses with a focus on fintech, healthcare, consumer and B2B. FFF has invested in more than 50 of the fastest-growing female-led firms in the US, including Zola, Tala and BentoBox.

2. Women’s Venture Capital Fund – this VC, led by Harvard Business School peers Edith Dorsen and Monica Dodi, makes investments in early-stage revenue-generating and capital-efficient firms led by executive teams that include both women and men.

3. BBG Ventures – they invest in startups with at least one female founder, and focus on early-stage funds across consumer internet and consumer tech, marketplaces, commerce, media and consumer product sectors in the areas of health and wellbeing, education and work and climate. The firm has made more than 100 investments to date.

4. January Ventures – Early-stage venture fund investing in female-led startups focused on forward-thinking tech. They have around 50 startups in their portfolio, and back founders based on their “tenacity and ambition”.

5. Halogen Ventures – LA-based Halogen Ventures is an early-stage VC firm that invests in consumer tech companies led by women, and since its inception in 2015, has invested in more than 60 female-founded firms with more than 10 exits including Squad App (acquired by Twitter) and Eloquii (acquired by Walmart). 

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