How do we finally change the dial on funding for female-founded businesses?
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By Dickie Currer
The Cut Through Ventures Quarterly Report, which is fast becoming the industry pulse check for the Australian Startup funding landscape, revealed that in Q2 2024, funding for female-founded startups slumped to the lowest it’s been since 2019.
This was a hard pill to swallow for an ecosystem that is talking a big game about gender equity, but not quite yet walking the walk to back it up.
So, what will see female entrepreneurs receive the same funding opportunities as their male counterparts? And why should you care that they do?
Let’s start by answering the latter first.
In doing so, I’ll quote something that Cindy Gallop – the founder of MakeLoveNotPorn, the world’s first user-generated, human-curated social sex platform – said at last year’s SXSW Sydney.
“We don’t want to live in a world that’s built by a bunch of rich, middle aged white men from America”.
She was, of course, referring to the founders of the world’s recent tech giants, whom Gallop claims “have built the internet as we know it from their point of view” and, thus, impacted (for better or worse) the way that we interact as human beings.
Without early seed investment, the Googles and Metas of the world would never have come into existence and have had the opportunity to change society so dramatically.
If we continue to only invest in male-led businesses, we’ll continue to only have male-led solutions – and the diverse and equitable world that we all crave to exist in will never become a reality.
So, how do we plot a path to a more equitable and utopian future?
Increased transparency around the where the money is going
In the three years that I’ve worked in it, the industry has already come on in leaps and bounds.
Initiatives like Equity Clear have emerged, founded by Scale Investors, Alberts and Giant Leap.
This initiative aims to establish a baseline for reporting success and to hold the 60+ investors signed up accountable for maintaining transparency regarding diversity in their deal pipeline.
Though more needs to be done, especially in the private equity sector, which to date has stayed largely silent in reporting on diversity metrics.
Some dissenters have called for government intervention, asking for legislation to force investors to share their portfolio and deal pipeline diversity.
A similar bill (SB54) has recently been passed in the US Senate with the support of Australian based family office F5 Collective, which invests solely into female founders.
With the Australian government not seemingly showing the same appetite, this might stay as a solution for the community and private sector to keep pushing.
More investment in later stage rounds
One of the standout statistics in the Cut Through Ventures report is that female funding at the early stage is actually increasing steadily.
Q2 saw female or mixed founded teams receive 20% of the pre-seed and seed capital invested.
It’s in later funding rounds where females are being left behind with only three female-lead startups having raised series B rounds of over $20 million in the entirety of 2024.
This is in stark contrast to the 13 deals of $20 million+ that were reported in Q2 alone across the entire ecosystem.
The reasons are unclear as to why.
A lack of belief in the long-term commercial viability of female-led businesses because of systemic bias about the roles/passion/motivations of women?
Hopefully, this is not true and simply a case of the maturity of the female founder pipeline’s growing pains.
Whichever way we try to explain it, while it’s great to see investment on the rise at the inception, without continued investment we’re going to continue to see a huge number of female-led startups fail – and thus continue to see women underrepresented.
A mindset shift
Yes, we want diversity in our innovation community.
Yes, we want to support female entrepreneurs.
And yes, we want to understand that the barriers to their success need breaking down.
But we also need to understand that women actually make some of the best leaders, brightest innovators and often build the most commercially successful businesses.
You only need to look at Canva – co-founded by CEO Melanie Perkins, the gold standard of Australian tech across the world – to see living proof of this.
I want to live in a world where the phrase “female founder” no longer needs to exist, and where we just talk about great business people, irrespective of their gender.
Together we can build that utopian future.
So, the next time somebody asks why you should care about raising the bar for female entrepreneurs, you know what to say and how you can help be a part of the change.