Cover Illustration by Felipe Mayerle

In a crowded 2020 for funding in Latin America, none of the $4.4 billion went to female-only founded startups

Data from Crunchbase shows that funding for female-only founded startups (including seed, venture, and corporate venture) went from $14 million in 2019 to zero in 2020

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Last year was busy for the capital market in Latin America, with new unicorns, such as the Brazilian property tech company Loft – which received $175 million, the second-largest 2020 round in the region – and the lending startup Creditas, in addition to the Mexican car marketplace Kavak. In Brazil alone, the $3.5 billion raised by startups was the largest in history, according to Distrito. Although the scenario for total investments fell from 2019 to 2020 in Latin America, startups in the region received $4.4 billion last year. But none of that amount came into the hands of female founders who do not have a male business partner, according to data from Crunchbase sent to LABS.

According to the platform’s data, rounds to startups founded only by women in Latin America went from $14 million in 2019 to zero in 2020 (see infographic). As for startups with women and men as founders, the resources raised fell from $748 million in 2019 to $612 million in 2020. In contrast, investments in startups founded only by men slightly grew in the region, from $3.80 billion to $3.83 billion.

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Venture capital investment in 2019 and 2020 into women-co-led startups included a significant round for the Brazilian neobank Nubank, which has Cristina Junqueira as co-founder and VP (a recording $300 million only last year). While increasing the amount received by companies co-led by women, this also means that the resources available ended up in the hands of a few.

“There are some improvements in funding mixed teams when there’s a man on the team. But when there’s only one woman or multiple women, that’s where we are seeing no change after 12 years in our funding date,” says Claire Díaz-Ortiz, partner at Magma Partners.

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Claire Díaz-Ortiz, partner at Magma Partners. Photo: Courtesy

And investors chose this path despite a series of evidence pointing in the opposite direction. Boston Consulting Group reports that for every dollar a female founder or co-founder raises, she generates 2.5 times more revenue than a male founder. First Round Capital‘s research shows that female founded companies perform 63% better than all-male founding teams. And the Ewing Marion Kauffman Foundation‘s report shows that the return on investment from women-led teams is 35% higher than their all-male counterparts. Latin America is just the most negative picture of a scenario that repeats itself globally.

But why did this happen?

Díaz-Ortiz, who is currently writing a book about female founders, says that in 2020, amid a climate of stress and caution, venture capital fund managers and investors ended up restricting their contributions to their existing networks. “Unfortunately, in a world where about 90% of investors in venture capital are men, existing networks are going to be the ones that those male partners already have, which are usually made up of male founders.”

There was a secondary issue to female founders: the remote work. “Working moms just had the worst year of their careers ever in 2020. And you see how tough it was for female founders,” she adds. Carolina Strobel, Redpoint eventures‘ second female partner, knows very well this double domestic work journey, which “became an infinite journey in the pandemic of COVID-19.”

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Carolina Strobel, partner at Redpoint eventures. Photo: Courtesy

“I’m talking (in meetings) and thinking about what’s for the children’s dinner, the next day’s schedule. I never went through such a moment of personal exhaustion; it needs a lot of organization to work. In my case, I have structure, and I can do that [work remotely] and dedicate myself to my goals. But imagine the vast majority of women entrepreneurs (in Latin America).”

Without a doubt, Strobel points out, the past ten months have been much more demanding for women than for men in Latin America, where domestic care obligations are culturally placed on the shoulders of women.

“The networking of people in the industry is with the people who make the industry, who are (mostly) white men. If we do not change this network in terms of gender, diversity, race, vulnerability, it will not change.”

Lícia Souza, founder of the Brazilian venture builder WE Impact dedicated to startups founded by women, adds that the venture capital environment is permeated with risks. As a pandemic is capable of turning the scenario into something chaotic, the risk view becomes even more prevalent.

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Lícia Souza, WE Impact’s CEO and founder. Photo: Courtesy

“As there are still few women starting startups, and still many men who make investment decisions, the consequence is that these male investors bet less on the female founders, turning themselves to an environment of supposed ‘comfort’ and ‘knowledge’. That is, investing in startups founded and led by men.”

Díaz-Ortiz highlights that about 8% of all investing partners in Latin America are women. In the US, this share rises to 13%. So, if most networking participants are white straight male, how to make them look for funding women’s startups? For her, the first step is making sure that you are a female founder-friendly fund.

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If you put out a job description, a woman is less likely to apply if she feels anyway underqualified, while a man is always likely to feel overqualified to apply. The same goes for venture capital funding. I believe it’s important to say that you want females founding businesses.

Claire Díaz-Ortiz, partner at Magma Partners

“Being a female founder-friendly (fund) is not only about showing the numbers, showing that you are investing in female founders, but also being clear that you want to do that. If you put out a job description, a woman is less likely to apply if she feels anyway underqualified, while a man is
always likely to feel overqualified to apply. The same goes for venture capital funding. I believe it’s important to say that you want females founding businesses,” she said.

Having a female investing partner in a VC fund makes it up to three times more likely to invest in a female founder, according to Ortiz. For addressing this kind of issue in the startup ecosystem, EWA Capital, the first private fund that is led by women founders in Colombia, will address 40% of its second fund for startups founded by women or for startups with women in C-level positions.

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“We believe the more women we have in the C level in startups; they will at the end of the day create their own companies. And that’s the main driver for us because they will create with experience, with real-life experience,
they will have an ‘MBA’ in a startup, they will know how to pivot a product, to do research, to raise capital, to handle investors,” says Patricia Sáenz, managing, and founding partner at EWA Capital.

Patricia Sáenz, managing, and founding partner at EWA Capital. Photo: Courtesy

COVID-19 accentuated inequalities

For Strobel, although it is not clear how much COVID-19 was responsible for this worldwide drop in funding in companies led by women, it cannot be denied that the gender gap has worsened with the pandemic.

Overall, the COVID-19 pandemic meant a disproportionate impact on the female workforce worldwide: a staggering 87% of women business owners claimed to have been adversely affected by the pandemic, according to the Mastercard Index of Women Entrepreneurs report, released in late-November. Whether by an overrepresentation in sectors hardest hit by economic setbacks, a digital gender gap in an increasingly virtual world, or by the many pressures of household and childcare responsibilities, the female workforce was left particularly vulnerable.

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In the US, employers cut 140,000 jobs in December. Women accounted for all the losses. Brazil followed the same direction. Between March and November last year, 107,500 formal job opportunities were occupied by men. At the same time, women lost 220,400 formal work positions, according to data from the Brazilian Ministry of Labor via the General Register of Employed and Unemployed (Caged, in Portuguese).

And when it comes to Black women, the impact was even greater. “Within the racial context, the Black population is the first one to be fired and the last one to be hired amid a crisis,” says Maitê Lourenço, CEO and founder of the Brazilian accelerator BlackRocks Startups.

For Black entrepreneurs, the pandemic interfered even more in the fundraising process. Lourenço says that the pandemic has made these women, once again, become caregivers for their families, mothers, aunts, children, nephews.

Maitê Lourenço, CEO and founder of BlackRocks Startups. Photo: Courtesy

“As a consequence, they ended up being out of the (venture capital) environment, (while) being ‘more aggressive’ in the sense of building products and services that can generate this impact. Bringing it to a financial perspective, the pandemic only revealed the distance between Black women and investment funds and incentives for them to undertake. Here in Brazil, we do not even have funds that look at racial diversity, let alone Black people leading these funds.”

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Here in Brazil, we do not even have funds that look at racial diversity, let alone Black people leading these funds.

Maitê Lourenço, CEO and founder of BlackRocks Startups

Lourenço adds that if today the venture capital market in Latin America is still mostly male, there is still a small percentage of white women accessing it. “We see the privilege there when we see that even in a group that is still very small, like women in the technology environment, white women are already included. We see several female investors, VC leaders in Brazil who, however small a percentage, are still proportionally higher than other groups.”

“We see companies that are led by women, but few Black women are leading the same spaces. We see institutions that claim that they are diverse, but they have no Black women in the leadership. This totally interferes with the process of these women becoming investors,” she says.

Lourenço adds it is a chain reaction: if there are no women leading companies, their salary is not compatible with the salary that it is possible to become an investor, and she is not within the venture capital ecosystem.

“We need to discuss this context of leadership and give Black women a space of possibility to lead in this ecosystem.”

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Decision-makers latinas in tech

Since 2014, Latinas in Tech (LiT), a non-profit organization with the aim to connect, support, and empower Latina women working in tech, has been working closely with technology companies to create safe spaces for learning, mentorship, and recruitment of latinas.

Before COVID-19, Latinas in Tech had live events in big tech companies, with 300 latinas attending, where they could be recruited. These events sponsorships were also the NGO’s main revenue source. The first company to talk about an annual sponsorship to have access to Latina’s programs was Airbnb, as the co-founder and executive director at LiT, Rocío Van Nierop tells LABS.

Today, the project’s partner companies are Silicon Valley Bank, Facebook, Dropbox, Google, Pinterest, Comcast, Twitter, and Paypal. Van Nierop explains that there were two main reasons for the tech companies to partner with the NGO: they wanted to test Latinas in Tech out and see how it would play out, host an event, and getting some recruiting; and they wanted actually to be partners, and post jobs on Latina’s platform and interact with its members, as its recruiting was at the center of it.

There was a third reason (one that fills the NGO’s leaders hearts): to ensure that latina women are going to companies that care about latinas that already exist in their companies, even before hiring new ones. Ensure that these companies will make them grow, that they will not be stuck in positions without promotion.

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Rocío Van Nierop, Co-founder and Executive Director of Latinas in Tech. Photo: Courtesy

“The number of people they hire that’s not my success metric; it is the number of latinas they promote. If they have more latinas growing, if we have latinas making decisions, latinas being the ones that hire. That is success. It’s a work in progress to ensure that they shift their primary goal from recruitment to the well being of existing latinas in the company, and the second goal of expanding the number of latinas,” stresses Van Nierop.

LiT’s advisor and LatAm’s director at Silicon Valley Bank, Julia Figueiredo, adds that the main reason for the gathering of Latinas in Tech, in the beginning, was that they all were latinas, born in Latam, working in Silicon Valley, and they wanted to help each other. “How do we grow in our careers, how do we interview, how do we negotiate salary? Helping each other to navigate the step work eight years ago because now we have more diversity and inclusion, but years ago was much harder.”

Julia Figueiredo, advisor at Latinas In Tech and LatAm’s director at Silicon Valley Bank. Photo: Courtesy

Mexican Consuelo Valverde graduated from electrical engineering at 20 years old. Back then, she didn’t fit in the job offerings searching for male 25+ years older engineers in Mexico. “But it was a very good thing to happen because it made me start my first tech company,” she recalls. Long story short, she saw the power of the VC market amid startups and turned out to be the founder and managing partner at SV Latam Capital.

Valverde tells LABS that being an outperforming woman founder can be something very challenging. “You would think it is easier. But no, people start questioning why it happened. Like she was just lucky because of this and that, they ask many more questions and just become more complicated. It doesn’t happen to men that outperform. They outperform and no question about it,” she says.

Consuelo Valverde, founder and managing partner, SV Latam Capital. Photo: Courtesy

A research published in Harvard Business Review shows that investors ask questions with a focus on potential losses and risks to female founders, as well as personal questions such as whether the founders are married and whether they have children or intend to have children. While, for male founders, the questions focus on the growth potential of the startup.

“As long as we don’t have more women in VCs, in bigger funds, we are not going to see bigger money going to women entrepreneurs.” Valverde believes that to change the data landscape showed by Crunchbase it is necessary to move women founders from raising $1k, $500k, to raise $10 million, $20 million, $100 million. “We need women decision-makers in larger funds.”

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Building a more inclusive tech environment

One of the suggestions to change the VC ecosystem is related to establishing a quota policy to build a diverse firm. Livia Brando, country manager at Wayra Brasil, says that Wayra’s fund asks its startups about the number of jobs generated and data on hiring men and women, in addition to classifications by color.

Livia Brando, country manager at Wayra Brasil. Photo: Courtesy

“This all puts pressure on the ecosystem in general. But the movement is very slow. If we are going to be held hostage to these adversities of this organic movement, I think it will take a long time to change things, so in my view, I think we really need to make some decisions [like quota policy].”

Former Mountain Nazca Colombia, EWA’s Capital managing partner Patricia Saenz adds that EWA’s main goal is to reach 10% of the fund invested by women. The firm is looking to invest where women are founders or where women are in C-suite, or even companies that are solving problems for women, where 60% or over of the customers are female, for example. “One of the things we are doing absolutely differently is to be supported by women investors, these are women that have been in a very high position in corporate and they have all this background. We want to be supportive in terms of empowerment.”