Biggest Drop in Venture Funding in a Decade for Female Founders in LA

Biggest Drop in Venture Funding in a Decade for Female Founders in LA

The pandemic has paused a substantial amount of venture activity for women entrepreneurs in Los Angeles. This year is on track to record the sharpest drop in investment in female-led startups in nearly a decade.

Female-founded companies in L.A. closed 2019 with 234 deals worth $1.4 billion. As of September 30, there have been 141 deals and $900 million invested, according to a report from Pitchbook released this week.

VC deal activity in female founded companies 2006-2020 VC deal activity for female-founded companies from 2006 through 2020.

The figures, though not complete for the year, show the pandemic is disproportionately hurting female entrepreneurs, eroding strides made in recent years. Across the economy, the pandemic has hit women harder.

In November there were 2.5 million fewer women in the workforce compared to the same time last year, according to U.S. Bureau of Labor Statistics. And economists worry the inequity caused by the pandemic could have long-term impacts.

This setback comes after years of progress for women-owned startups. Last year, investments in female-founded companies hit over $20 billion — 10 times the amount of a decade ago.

Female-founded companies as a proportion of all VC deal activity from. 2006 through 2020

The report did not take into account race, but Los Angeles is notable as a popular city for Latina and Black women founders to begin startups along with New York and San Francisco, according to a survey by digitalundivided, a nonprofit that tracks female entrepreneurs of color across the country. These entrepreneurs tend to have a harder time accessing capital.

Beatriz Acevedo, the co-founder of a new fintech company for Latino youth, was one entrepreneur on the hunt for funding mid-pandemic. She was able to double the pre-seed amount she sought, but she attributed that to her investors. 90% of them are Latina and all are women.

"Even in the middle of a pandemic, of an economic downturn, they saw the need," she said. "I didn't have to oversell myself."

Acevedo, the founder of millennial media company mitú, which was sold to Latido Networks earlier this year, said she had a much harder time when she sought to raise money from traditional investors, most of whom were white men.

"I'm kind of like an outlier," she said. "I'm incredibly grateful and I understand I'm in a position of privilege because not only am I a woman, but I'm a woman and I'm an immigrant. I'm over 50. I've never been in FinTech."

Funding for female founders across the country dropped 31% from the first three quarters of 2019. That's compared to a 16% drop to all-male founders.

Yet, female-founded companies exited faster than the overall market. Pitchboook found that 2020 was on track to mark the 10th straight year of that trend.

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On this week's episode of the L.A. Venture podcast, hear from Chang Xu, partner at Basis Set Ventures, a $140 million fund focused on AI and automation - technology that transforms the way people work.

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Minnie Ingersoll
Minnie Ingersoll is a partner at TenOneTen and host of the LA Venture podcast. Prior to TenOneTen, Minnie was the COO and co-founder of $100M+, an online marketplace for used cars. Minnie started her career as an early product manager at Google. Minnie studied Computer Science at Stanford and has an MBA from HBS. She recently moved back to L.A. after 20+ years in the Bay Area and is excited to be a part of the growing tech ecosystem of Southern California. In her space time, Minnie surfs baby waves and raises baby people.

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Ben Bergman

Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.