TORONTO — Members of Canada’s tech community worry that the sector’s recent recession will weigh even more on female founders, who have long lagged behind their male counterparts when it comes to fundraising. says there is.
Their concerns come at a time when the global tech sector is ranked by declining spending as consumers return to pre-pandemic habits. The sector is also grappling with widespread layoffs and declining corporate values, and founders are struggling to raise capital as investor dynamism wanes.
“The way one investor put it, ‘It’s bloody out there,’ means the funding environment has gone to hell,” said Caitlin McGregor, founder of Waterloo, Ontario. I’m here. Recruitment technology company Plum.
She has been pitching for more funding since September after previously raising $11 million. She is confident she can get the cash she needs, but she and others feel that many women would struggle harder than usual to accomplish the same feat. ing.
“Women get a smaller share of the available capital, and the smaller that capital gets, the smaller the share that gets distributed to women,” says MacGregor.
“This means that the percentage of companies going bankrupt due to their inability to raise funds will increase.”
Waterloo, Ontario. Data firm Briefed.In has found that the Canadian tech firm will receive $14 billion in 2021 from its 701 transactions. At this time, the market was still skyrocketing as companies predicted the pandemic’s massive growth would continue. By 2022, investment activity has dwindled to $9.7 billion in his 417 deals.
With $176.9 million invested in eight deals so far this year, many feel 2023 will end even lower than last year. If past trends continue, women will earn only a small percentage of the available cash.
Women-owned businesses received only 2.3% of the worldwide available venture capital (VC) funding in 2020, down from 2.8% in 2019, according to data firm Crunchbase. I’m here.
“Today’s market conditions don’t help,” said Rhiannon Davies, general partner at Sandpiper Ventures, a Halifax-based seed-stage venture capital fund that invests exclusively in women-led Canadian companies. increase.
In the early days of the pandemic, she found companies going public and investors achieving high exits due to capital surges, competitive deals and huge valuations.
A frenetic market has created an uptick in investment in women and other undervalued founders, which Davis said is proportional to the wave of funding the sector is seeing. .
“The ratio isn’t changing fast enough. We’re not moving the dials,” she said.
“There is still a trend toward token investment in women’s technology as opposed to real change that says this is the direction we should go.”
Many believe that investing in these tokens is because the funders have funded companies they already know and have followed in the footsteps of others they have successfully invested in. Others feel they are prominent schools, employers or incubators who have previously created hit companies and have appeared on founder resumes. Funding decisions can also be taken into account.
Davies calls investors sticking to what they “know” and “repeating the same patterns.”
McGregor calls it “implicit bias.”
“They’re looking at whether this person has worked in the technology company or the industry they’re building in, has previously raised money, or has previously successfully exited the business. ‘ she said.
“When women are just starting out, they often don’t always fit the pattern the first time.”
They are also less likely to pitch investors similar to themselves. Women made up just 19.4% of her Canadian VC partners in 2019, and 27% of her Canadian angel investors in 2021, according to diversity data firm Diversio, according to the National Angel Capital Organization. said.
Female founders are twice as likely to invest in women-led startups, according to research from the Silicon Valley-based Kauffman Fellows Program.
To address the funding shortfall, some VC funds target only women-led companies, but Davies said they were inundated with hundreds of requests, often only supporting 12.
“There’s tremendous demand, but it’s a huge amount of work for investors to actually evaluate effectively and make sure founders don’t feel left out.”
When Toronto entrepreneur Liza Akhfreziani launched her rent-paying platform Chexy in late 2021, she had little success targeting female founders.
“Maybe it’s because there’s too much demand from other female founders, and there aren’t many of them,” she hypothesized.
She eventually raised money from early-stage investor Antler, but before that backing she had a hard time finding someone to hand over the cash.
Akhvledziani believes the difficulty has not come from her being a woman, but rather that the recent market downturn has exacerbated the lack of funding across Canada and the reluctance to help early-stage companies.
Akhvledziani said, “The number of people willing to write checks is going to be a lot less for now.”
“Not that they need to spend this money…they are losing money on the open market every day.”
She is envious of the higher capital rates the U.S. enjoys and is disappointed by the problems many founders face to bring their ideas to life, but success for Canadian startups is still on the horizon. I believe that we are approaching
“Good business models and good teams are always funded,” said Akhvledziani.
“If we can finance and execute well in this macroeconomic climate, when the tide turns, it will be even better for us and we can kill it.”
This report by the Canadian Press was first published on January 27, 2023.
Tara Deschamps, Canadian Press