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 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.