Despite tough market, female founders prove resilient in venture capital landscape | Nation

Nearly a decade ago, venture capital funds with a gender-diversity strategy were hard to find in the vast heartland of the U.S. between the coasts.

Austin-based True Wealth Ventures set out to remedy that. It searches for financially outperforming startups led by women that aim to improve environmental or human health.

General partners Sara Brand and Kerry Rupp began raising money for their firm’s first two investment funds and quickly discovered that most of their investors had never even been invited to put money into a VC fund. Neither had they, despite being veterans of the tech industry.

“So that’s been a real focus of ours now, having more of a local network of women investors in VC, and we think that Texas is particularly well positioned for that,” Brand said.

Women compose less than a fifth of managers at VC firms, and less than 5% of shops have a majority of female check-writers, according to a Pitchbook report examining U.S. venture capital trends for women over the last 14 years.

Having more women decision-makers, or general partners, in venture capital firms can open doors for female founders to access necessary capital and provide limited partners with diversified investment opportunities, the report said.

Female-founded companies represent a quarter of this year’s total VC deal count. But the amount of money flowing to them is less than 3% of the $158.5 billion invested this year.

To make the VC landscape more equitable, there’s been an emphasis on raising the number of women in decision-making roles within firms, said Annemarie Donegan, a Pitchbook analyst. Women entrepreneurs can benefit greatly from having someone at the table who might better understand a company’s demographic.

“As we expect to see the number of female GPs rise, we can also expect to see a rise in the venture dollars granted to female founders,” Donegan said.

True Wealth’s Rupp said her firm’s decision to support women entrepreneurs was a financial thesis.

“It wasn’t just a feminist manifesto,” Rupp said. “This is an opportunity for an outsized return, and it’s being overlooked.”

Year-to-date data through Sept. 30 shows venture capital deals with female founders total $32.4 billion — making 2022 the second biggest year for them in terms of deal value. The 2,800 deals involving female-founded companies are up 39% this year, Donegan said.

Of the 16 companies in True Wealth’s portfolio, nearly a third of the founders are based in Texas, like Claire Siegel of Austin, who is prepping for a new round of venture fundraising in 2023. She’s a founder of Flourish, a subscription-based app that offers personalized health coaching for women.

Prior to pitching and working with True Wealth, her first outside investment came from a tech accelerator program. While Siegel’s cohort was filled with diverse founders and businesses, she knew outside of the incubator that she’d most likely be pitching Flourish to men.

“I knew I was not necessarily going into a world full of people that looked like me, or even understood me or the problem I was trying to solve,” she said.

While the pitching process can be nerve-racking, Siegel said she focuses on how to present the company’s potential for financial success in a way that resonates with any investor.

“This is not philanthropy,” Siegel said. “This is not charity work to invest in women-led companies. This is an amazing opportunity to invest in a great business that is doing good in the world that will have incredible returns.”

Across the country, there have been mixed results in how firms are navigating this year’s challenging investment market after a year of all-time highs in 2021, Donegan said.

In Dallas-Fort Worth, the VC spigot tightened considerably this year for companies founded either solely or co-jointly by women. They’ve raised $272 million in 33 deals. Last year, women-founded startups hauled in a record $969 million in 35 deals.

When it comes to dollars invested, Texas female-founded companies fall behind their coastal peers. Texas companies attracted nearly $8 billion in capital in more than 1,300 deals over the last 14 years, and over half of the money invested went to Austin-area companies.

The San Francisco Bay area tops the list with more than $61 billion of capital invested over the 14-year span, followed by New York City, Los Angeles and Boston.