Female-Led Startups Are the Focus of New Venture Capital Fund

2020 was a benchmark year that tested us beyond measure. Most of us alive today have never seen so many upheavals and life-changing events in a single year. Normal life as we know was hit and how! Health, family, school, businesses, jobs, services; seemingly everything was impacted across the globe amid the pandemic. 

As has been widely reported, COVID-19 has also unleashed an astounding withdrawal of women from the workforce, leaving women’s employment rates at a 33-year low, according to an analysis by the National Women’s Law Center. This phenomenon has even come to be known as the “she-cession” in the popular vernacular. To counter this exodus and get a grip on the ravages caused by the pandemic and its corresponding macroeconomic forces, a group of female venture capitalists have taken things into their own hands. Heather Jerrehian and Nicole DeMeo are part of an eight-member team who have formed a global VC fund dubbed How Women Invest. Their plan is straightforward: Form a direct-action group that impacts women by generating jobs while benefitting the national economy as a whole. 

Female founders hire up to six times more women than do male founders, according to research from the Kauffman Fellows Research Center, a finding that Jerrehian and DeMeo say is the foundational brick of How Women Invest. The fund aims to remove what they call “the 2% ceiling” on investments on female-founded and female-led companies. Crunchbase data show that global venture capital investment in woman-founded startups reached a peak of 2.8% in 2109 and dropped to 2.3% in 2020. The aim is to target the estimated $5 trillion left on the table by investors that traditionally focus on male-led companies.

So, is this VC fund’s formation and its special mandate just to give a leg up to their female brethren? A deeper look indicates the urgency of the cause. The fund was created as a direct response to the disproportionate effects that women face in the post COVID-19 economy. Women have experienced more than 5.3 million job losses since the beginning of the pandemic compared to an estimated 1.8 million men during the same period. The reduced growth in female-led ventures and less-inclusive workplaces that these figures indicate translate to a lower return on investment and has a ripple on the innovation front. According to one study by the Boston Consulting Group, female-led startups created 78 cents in revenue for every dollar invested versus 31 cents generated by male-led startups.

Further, as reiterated by many from the financial world, investing in women-led businesses makes sound economic sense. Morgan Stanley and Boston Consulting analyses estimate that investing in women would add $5 trillion to the world economy and $4.4 trillion to the national economy. Morgan Stanley even likened the position of women-centric investments now to where cloud computing was 10 years ago and where the Internet was 20 years ago.

So, how is HWI involved in all this? They started cracking some eight months back and received close to $10 million in funding with the support of their founding limited partners with general partners Julie Castro Abrams and Erika Cramer leading the effort. HWI differs from other VC funds in that it has a network of more than 14,000 women professionals who participate in their sister network, How Women Lead. HWI’s leaders call it a case of transferrable trust, wherein one member brings in another member, and in turn the entire group benefits.

HWI has already attained 211 limited partners and investors, many of whom are first-time investors and 90% of whom are women. Its first round was oversubscribed and closed in eight months, investing in high-growth, female-founded startups Gray Matter Analytics and Hitch Works. The waitlist for their second round is already amassing a lot of interest and applications. 

HWI describes itself as investing, networking and mentoring women to lead their businesses and also to be competition-worthy in today’s market. The immediate aim is to get 1,000 new investors into their fold, and to educate them on the pros and cons of the market. But broadly speaking, their ultimate goal is to educate and reach out to 10,000 women to educate, invest and make an impact that is felt in a tangible and positive way.