A Pandemic Takeaway for Women Founders

By Sallie Krawcheck

If you’re reading this, you likely share the belief that, as we like to say at Ellevest, “nothing bad happens when women have more money.”

You also likely know that the pandemic derailed women’s financial progress — by some estimates, setting women back decades. There has been a lot written about this — how it was the result of women making up a greater share of service workers, how women do more work inside the home.

But I’ve also been fretting a less-noted setback for women: that the share of venture capital dollars that women entrepreneurs raised coming through and out of the pandemic fell a full 27%, from an anemic 2.8% of the overall total in 2019 to an are-you-freakin’-kidding-me 2.3% in 2020.

Of course, this is terrible news for the start-up founders themselves, but it’s also important because a good number of these businesses were founded to solve problems for other women — so the loss might very well have a ripple effect for women and their families more broadly.

The reasoning for the venture share loss seems clear, on the surface: Men venture capitalists backed other men entrepreneurs. In 2020, these men did business with people they felt more comfortable with, particularly given the weirdness of meeting new people over Zoom. And stress, as we know, always makes implicit bias worse.

But there may have been something else going on, too.

Before I share this, I should clarify that this is anecdotal knowledge only. It’s something I’ve been hearing from investors and some CEOs, and I find it interesting, and potentially illuminating —but thus far, I haven’t seen any statistics backing it.

Background: In March of 2020, iconic venture capital firm Sequoia Capital issued a note to their portfolio companies that they should batten down the hatches to weather the pandemic. They suggested that start-ups should prepare as though no venture funding would be available in the immediate future, even for those companies that were not directly impacted by the pandemic. For many start-ups, extending their runway meant cutting costs … which often meant laying people off. In some cases, a lot of people.

That this advice came from Sequoia carried extra weight. In 2008, they made the same type of call during the financial crisis — at that time, they were early, and they were right. So this time, many other venture investors and board members echoed Sequoia’s “retreat, retreat!” call with their own companies.

Here’s where the anecdotal part comes in: Women CEOs took heed and cut costs. I have spoken to at least half a dozen who quickly laid people off, even if the pandemic wasn’t likely to hurt their businesses.

As the months passed and the world adjusted to a new “normal,” these women-run companies — now operating with a reduced workforce — ended up missing their earnings plans and key performance indicators, or KPIs, and their growth slowed. That, in turn, made it difficult for those companies to raise their next round of VC funding.

Was this a gender thing? It’s very possible. Many women start-up CEOs have acknowledged an internal conflict between “following the rules” (in this case, taking the board’s direction), which we’ve been socialized to do since childhood, and betting against conventional wisdom, which can be a key to success in a start-up. It’s easy to see how this conflict could be exacerbated by uncertainty, especially when there is a great deal of uncertainty and when things are moving quickly.

Maybe male CEOs chose not to cut costs so drastically, and that allowed them to hit their business goals and subsequently raise the capital they needed. Or maybe men did cut costs and grew more slowly, but were given more leeway if they didn’t meet their KPIs. (There’s certainly research that says men in corporate America are held to lower standards than women are, so this may hold in venture investing as well.)

Whatever the case, when it came to funding, men ended up taking even more of the lion’s share than usual.

So what’s the lesson here?

I’ve been in business for decades now (eek!), and for me, it’s this: When you’re making a critical call about your business, get as many numbers, facts, and analyses as you can to inform your decision. And when the numbers run out, trust your intuition, even if it feels out of character; sometimes it turns out that my body knew the right call long before my brain has a chance to catch up. (That might sound a little woo-woo, but there’s a lot of science that supports going with your gut.)

The shame of all of this is that so many of these women-led businesses are just as viable now than they were before the pandemic forced their hand. Some might be even more so now, because they’ve learned how to run their businesses with even less capital.

Which is why I’m glad to see more and more women investing in businesses run by other women. If we can increase these businesses’ share of venture money, we’re ensuring more women-led companies have a better chance at long-term success — and hopefully push the broader culture of investing toward a more equitable (and resilient!) future.

Sallie Krawcheck Signature


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Sallie Krawcheck

Sallie Krawcheck is the Founder & CEO of Ellevest.