The Hidden Challenge of Fundraising as a Woman, for Other Women

Women founders saw an uptick in VC funding in 2021, the first swing in a positive direction for female founders in over two years.

After only 2.3 percent of all venture capital went to women-led startup teams in 2020, more than $40 billion was passed to women-led startup teams in the first three quarters of 2021.

Fundraising continues to be a consistent challenge for any founder, regardless of gender. Starting a new company at the crux of the pandemic only meant navigating more obstacles on top of convincing investors such as remote calls and that your business could survive the pitfalls of the COVID-19 pandemic.

But for women founders who are creating products geared toward anyone that’s not a cis white man, the fundraising process can be even more challenging.

“There is unfortunately a subconscious bias around building products that are designed for women and non-binary folks,” Emma Bates, the founder and CEO of Diem, told The Org. “As soon as you call that out, people seem to associate it with charity work.”

Bates and her co-founder Divia Singh launched their women’s knowledge-sharing platform Diem in 2020. It started originally as a newsletter, after a frustrated Bates had nowhere to turn to for answers to what she thought were basic questions about the female experience online. Now, Diem has sprouted into a knowledge sharing app, where women and non-binary folks can listen to audio-based candid conversations led by verified thought leaders around everything from their finances to their wellbeing and share written notes with tips or questions for the wider community to discover.

“If you look at consumer spending reports, women control over 85% of consumer spending in the U.S. alone,” Bates said. “That’s billions and billions of dollars every year. They spend that way in worlds that weren’t built for them. And we sort of say ‘imagine what the opportunity would be if we built a world that was.”

They’ve raised two rounds since it launched in 2020. Part of TechStars New York accelerator in the summer of 2020, Diem was able to raise money through the accelerator and angel investments on top of that. They raised a pre-seed round in early 2021 by bringing in two funds and more than 20 angel investors.

A former Head of Marketing at Away, she is no stranger to the startup world. Looking back on her own fundraising process, Bates recalls that she knew going into it that it would not be easy, but was still surprised by how frustrating some of the questions were that she received from investors.

“I think that we came up against a lot of bias, not only because we are founders that happen to identify as women, but because we were building a product or an app that for some reason people didn’t really seem to see the opportunity for,” Bates said.

Bates emphasizes that having to explain herself and the problem of what her startup was trying to solve before she could get a chance to explain the business opportunity was undoubtedly the most frustrating part of her experience.

“The more time you spend educating on the issue, the less time you have on those phone calls to showcase the vision and opportunity that Diem has.”

A major reason women founders spend so much time explaining the market for their startups is due to who they end up pitching too. As of September 2021, only 15.4% of partners at VC firms are women.

Rebekah Bastian is the founder and CEO of OwnTrail, another online community geared toward women for them to share their personal and professional growth journeys.

Bastian, a former VP of Product at Zillow, went into the fundraising process confidently, only to be surprised just how much evidence she had to provide to investors at such an early stage compared to what she saw in her male counterparts.

“We’re an all women team building a product for women and most investors out there are men,” Bastian said. “People just didn’t get it. Iit was very much ‘people thinking it's a vitamin, when we know it's a painkiller’ kind of conversation.”

Explaining a lived experience you’ve had to an investor who has never faced that issue was the biggest pain point both Bastian and Bates saw firsthand. And when you’re pitching, time is valuable. Research has shown that VCs typically only spend 3.5 minutes per pitch deck.

It doesn’t end at justifying that a market exists for women-centered products and services. Female founders also face explaining themselves more in general.

“It turned out that we were forced into figuring out the business model very early on,” Bastian said. “I'd look around and see men that I've worked with before, you know, like, white male counterparts, who are literally getting checks with these ideas in their head that hadn't even fleshed anything out yet. The discrepancy there was just really apparent.”

Despite the extra challenges women founders are finding during the fundraising process, both founders said that they can see change on the horizon.

“One thing I'm optimistic about is the number of women-led teams out there,” Bates said “I think that there are so many epic people who happened to be women who are building incredible businesses and I find that really exciting to see.”

She said the biggest difference in shaking up the current fundraising space will be women investing into funds as LPs.

“I think it will make a huge difference in terms of where the money is allocated, as well as more check writers like people, partners and people who have decision making ability,” Bates said.

It’s a sentiment with which Bastian also agrees.

“I aspire to continue our trends of having a really diverse and supportive community of investors that are in it with us and ultimately making money for a different set of people than the same same dudes that have always made money off of startups,” Bastian said. “When we do see the numbers getting better in the future, it's going to be because of this new wave.