Funding the Future: The Importance of Investing in Women-led Tech Companies

Access to capital is a major hurdle for underrepresented founders in the tech sector. Women often face significant barriers when trying to secure funding for their startups. Recent years have seen a push for greater gender diversity in the tech sector and Canada is no exception. There are many organizations and initiatives that have emerged to support women's participation in tech.

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ventureLAB’s Tech Undivided Program is an initiative for women tech founders to grow and scale their businesses. Beyond technology and business support, Tech Undivided's vision is to reduce unconscious bias and create an inclusive tech ecosystem that increases representation and access to capital, which has provided resources and advisory for over 30 women-led companies spanning over five cohorts. 

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Tech Undivided is one program among many initiatives that aim to provide funding and resources to support women entrepreneurs in the tech sector. While these initiatives are a big step in the right direction, there is still a long way to go to achieve equity in this area.

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By working together, we can create a more inclusive and equitable tech sector for all.

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Insight From ventureLAB's Advisors

What are some of the primary barriers that women founders face when it comes to accessing capital, and what can be done to address these barriers?

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There is an increasing number of women angel investors who relate to early-stage founders. They have shared experiences, founded companies themselves and have the capital to reinvest their time and money into startups. 

There are certainly still barriers including bias, the natural flow of networks and opportunities where women are predominantly underrepresented. As more and more investors intentionally focus on women; new, powerful networks will build success for women entrepreneurs.

How important is it for the tech industry to prioritize diversity and inclusion, and what specific steps can be taken to create a more level playing field for women founders seeking access to capital?

Women are starting ventures at a greater rate than ever before, with BDC reporting a 23% increase in women entrepreneurs. Yet only 4% are venture-backed and only 2.2% of funding goes to women-led ventures.

The opportunity for a level playing field in seeking capital is three-fold:

1. The complex global challenges we face require the best teams we can put forward. If you don't have a woman or diverse founder (with equity) on the leadership team in your early-stage venture, it is never too early to find one. The evidence is clear, diversity will make you more competitive, profitable and resilient.

2. We can’t fight climate change without gender equity. By solving specific problems facing the world, women-led ventures are disrupting traditional markets with solutions that consider a sustainable, just future for the next generation.

3. Truly acknowledge the unique value and insights women offer. Acknowledge and appreciate it rather than let fear drive it away. Women-led ventures are addressing critical market opportunities, they have proven to be more capital efficient, and continue to demonstrate high profitability.

The world needs more women founders, investors, and women-led startups along with more funding. More women investors will lead to more funding, which will lead to more women-founded startups, in a virtuous cycle.

How do you see the landscape of venture capital evolving with respect to supporting women founders, and what do you think the implications of these changes will be for the industry as a whole?

Women entrepreneurs continue to be rejected by VC’s at much higher rates than their male counterparts. That being said, positive changes have begun to be seen in the last five years or so that signal a more robust future for investment in companies founded by women.

The changes are fundamental and long-lasting because they involve a shift in the control of power in the investment community. As a result, women are gaining greater influence in investment decision-making. But we are just starting to see this trend.

There is a growing number of Angels who are women. More women are creating VC funds and choosing to invest in female-founded companies. More women are moving into leadership roles in established VC firms. Two of ventureLAB’s Capital Investment Program advisors are women who founded and lead their own investment funds for women.

Although women’s participation and influence are growing, change will not happen overnight.

Fundamental change like this is generational in nature and will take time, but the changes are unstoppable. Women have role models with whom to align themselves whether in politics, business, the arts or finance. Women are wealthier and are earning their own money to invest. They have high expectations for their careers and their involvement at the highest levels of decision-making.

In your view, what are some of the most effective ways for women founders to demonstrate their potential to investors and secure the funding they need to grow their businesses?

Encouragement and support, from the family, society, and the government are the two most important things that motivate women entrepreneurs.

Ask the Right Questions: It is vital to build meaningful relationships with industry experts. Focus on doing one thing remarkably before moving on to the next, and in the process, you will build meaningful relationships not only with customers but also with industry experts.

Believe in Yourself: Some women founders tend to doubt their capabilities and as a result, end up playing it safe. Entrepreneurs should understand that investors know that startups are a risky asset class. So, there’s no need for founders to hold back while executing their ideas.

Defining the Start-up’s Investment Potential: When talking to a group of investors, it becomes indispensable to discuss the factors that define a startup’s investment potential. Across the board, investors agreed that the startup idea should solve a large market problem, the differentiating factor in the idea, quality of leadership and team capabilities and finally, strong unit economics.

Starting a business can be a rewarding or daunting experience for any founder. While women are indeed beating all odds and building thriving companies worldwide, it is now time to raise the profile of women-led ventures which can serve as an inspiration to others who want to pursue their ambitions.

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