In Philly, less than a fifth of all VC dollars go to women-founded companies

The picture laid bare by market data research company PitchBook stats is abundantly clear: In Philly, much like the rest of the country, the flow of VC dollars is overwhelmingly biased toward men, with only a couple cents of each VC dollar going to companies with one or more female founders.

Philadelphia-based companies with at least one female founder brought in $256.72 million in venture capital in 2018, including angel or seed capital. That means that, when pitted against the overall pool of regional capital, companies founded by at least one woman received only about 18.4 percent of $1.4 billion in venture capital deals that took place in the area last year, according to analysis of statistics provided by PitchBook and a recent report from the Philadelphia Alliance of Capital and Technology.

Venture capital deals for companies with all female founders totaled $29.99 million, per Pitchbook — about 2.14 percent of all deals.

The disparity in these numbers rings true for Group K Diagnostics’ Brianna Wronko. The founder, whose diagnostics startup raised a $2 million Series A round last year, said that investors tend to view female founders through a different lens.

“This does not apply to our investors, but the hurdle women face is that we’re not taken seriously,” Wronko said. “Just like in any other male-dominated field, investors see a young woman and think that she doesn’t have experience. In women founders, adjectives like ‘brash’ and ‘bold’ are seen as risky.”

There are still fundamental differences between the genders and how they're handled in the business environment today.

The biases that local female founders have to contend with echo the slanted picture of VC across the country. For every venture dollar invested in 2018, only 2.2 cents went to companies with an all-female founding team.

Why is the field so lopsided? Ask Dreamit Chief Investment Officer Karen Griffith Gryga and she’ll cede that it’s a multi-factored issue, but one place to start is the systemic gender inequality that begins in early age.

“A lot of it is based upon the structure of society and unconscious bias,” said the investor. “Over the past two decades, that unconscious bias has decreased. That’s certainly driven by the evolution of thinking and the younger generation being raised in a different framework. Unfortunately, the way we are raising our children still engenders unconscious bias into our thinking.”

(Girls Who Code founder Reshma Saujani points to the dangers of that mindset in her book, “Brave, Not Perfect.”)

Griffith Gryga said that inequality is reflected in the entrepreneurial landscape, too: Women are held to different standards in their resumes, have to fight for attention in meetings and ultimately face steeper odds in the pitch room.

“There are still fundamental differences between the genders and how they’re handled in the business environment today,” she said.

It’s unlikely to surprise you, but the uneven distribution of venture capital also carries a racial bias. According to biennial demographic study ProjectDiane, only 34 Black women have raised over $1 million in venture capital between 2009 and 2017.

Area companies raised $1.396 billion in 2018, an 86 percent jump from the previous year's $749.6 million.

Locally, the Backstage Capital accelerator program is working on a fix to the problem: A half-dozen local startups led by diverse founders are undergoing a three-month program aimed at scaling up their operations. They will each receive between $25,000 and $100,000 in seed funding from the Los Angeles-based venture firm, which bets on underrepresented founders as an investment thesis.

“Backstage needed to exist,” founder Arlan Hamilton said in Philly last week, at the launch of the local cohort. “The need is there.”

For those looking for an uplifting number, you’ll do well to check the status of Philly investing activity overall. The report from PACT and financial services firm BridgeBank says investing in the region hit a 10-year high: Area companies raised $1.396 billion in 2018, an 86 percent jump from the previous year’s $749.6 million.

PACT CEO Dean Miller was unsurprisingly pumped about this year’s stats, but he said the thing to really watch is where the trend line in the area is headed. Up and to the right, he said, means good news.

But what about the gender gap? Miller said that, while Philly is by no means gender balanced, it is less skewed than Silicon Valley, where the broad majority of deals in the country take place.

“The next generation is a lot more diverse from a gender and color perspective,” Miller said. “Look at the single biggest exit that just occurred [the acquisition of Spark Therapeutics]. It features two cofounders: a woman [Dr. Katherine High] and a man [Jeff Marrazzo]. That’s the kind of example I’m talking about.”

Maybe, said Robin Hood Ventures investor Ellen Weber, if VCs had to compete in terms of diversity, the game could change.

But there are things that can be done to more drastically change the status quo. Robin Hood Ventures investor Ellen Weber said the recently announced Female Founders and Funders meetup group is one way to provide access to valuable resources and connections for women founders.

“This is something that’s happening in other parts of the country,” Weber said. “It makes so much difference for women to have a place to ask their questions.”

Maybe, she said, if VCs had to compete in terms of diversity, the game could change.

“It’s fascinating, but there are founders who are saying to VCs: ‘We’re not interested in your money unless you can show us you are investing in women-led companies,'” Weber said.

Ultimately, Griffith Gryga said, a fix to inequality must start by addressing the lack of women decision-makers in the room. And Weber agrees: When LIA Diagnostics pitched its flushable, biodegradable pregancy test, it resonated with female investors because it was an idea they could grasp quickly.

“The wide majority of financiers are men,” the investor said. “That has changed in that you have more funds today that are focused on female founders, but it’s still just a scratch in the surface.”

Wronko, in the meantime, suggests taking a step back and looking at the gender split in entrepreneurship as a whole.

“It’s about allowing women to understand they can be an entrepreneur in a male dominated field,” Wronko said. “In that space, I think Philly is strong; with organizations like Rebel Ventures, Philly Startup Leaders and others that are interested in teaching young women, even kids, that entrepreneurship can be an option for women.”