In August of 2019, the World Economic Forum published a sobering statistic: If the trends at the time continued, it would take 208 years to close the gender gap in the U.S.
As the leader of a prominent community of women and nonbinary founders, and as a mom to two little girls, the report felt personal. I remember thinking: “Wow. This is really bad.” Never in my wildest dreams would I have guessed that just over a year later, gender equity would get much, much worse.
Seven months ago, our lives were disrupted by the COVID-19 pandemic. Today, we have clear evidence that the brunt of its economic impact in the United States has been borne by women.
Last month, 865,000 women left the workforce—four times more than the equivalent number of men. Venture funding for women-founded companies has historically been abysmal, at less than 3% of all venture capital invested. Last quarter, it dropped to a three-year low. To cap this grim picture, new data by the Female Founders Alliance, the organization I run, suggests that fewer women are starting companies due to the pandemic.
In September, our team surveyed a diverse group of professional women and nonbinary individuals with high likelihood of having entrepreneurial aspirations, including 38% people of color and 5% who use they/them pronouns. Before the pandemic, 87% were somewhat or highly likely to start a company. Six months later, 51% of them have delayed or scrapped these plans.
The primary reason for this change is financial instability: 48% of those who changed their plans did so because they need steady paychecks; another 20% rely on steady corporate benefits, including health insurance. As one respondent told us, “I am feeling very unstable monetarily about the future. I’m approaching 32 and wanted to start a company with a friend in NYC, buy a small house, and maybe plan for a family with my partner. Now I’m going to focus on my contract job and forget the company, stay in our apartment, NOT plan for kids, and see how things pan out over the next year.”
The paltry fundraising landscape for women founders also creates a catch-22: Would-be startup founders who have full-time jobs have trouble fundraising, but without funding, they can’t quit their jobs to work on their startup full-time. This was true before the pandemic, affecting women of color even more. And it’s worse now. “I’m struggling to get my startup to a level worth investment as a side gig,” said a would-be founder in Richmond, Virginia. “It feels risky to quit my job without funding. It is a chicken-and-egg scenario and extremely irresponsible considering I am the ‘breadwinner’ in my family.”
The impact of the pandemic on childcare and schooling has exacerbated these problems for moms. Seventy percent of respondents with school-age children are now responsible for managing remote learning, and a fifth of respondents have lost all or most of their childcare. And even though most respondents are still employed (84%) and living with a partner (70%), 45% of them report being fully or mostly responsible for additional caretaking responsibilities brought on by the pandemic.
Starting a family has made me question if it is possible to leave my corporate job and pursue my side gig full-time.”
“Starting a family has made me question if it is possible to leave my corporate job and pursue my side gig full-time,” said one respondent. Another added: “I’m juggling close to full time hours, and teaching, and childcare for my three year old, as my husband works full time and is in school for his PhD. If I stop, it would be a huge setback career-wise. So I work constantly, late nights, early mornings, seven days a week.”
One bright spot in an otherwise grim landscape is that 14% of our respondents started a company in the COVID era, even though they hadn’t been planning to. The net effect is that VC investors have continued to see women-founded companies among their deal flow, albeit not as many as they would have otherwise.
Some of these new startup founders—ones who don’t have kids at home—report that they started a company because they had more free time than before. Others started a company out of necessity after losing their full-time job. But the majority—a full 64%—started a company because they found an opportunity and decided not to wait. One recent founder reported that “racial discrimination and being taken advantage [of] was a constant in my career. After the murder of George Floyd I refused to accept it anymore. I gave my two weeks (notice) and went for it.”
We won’t know the net effect of these two groups—those who postponed and those who accelerated their startup plans—until macroeconomic data is released detailing new company formation in 2020. In the meantime, the picture that emerges is not one of a stalled pipeline of women and nonbinary founded companies. Rather, it’s one of accentuated privilege, where those who can afford to live without a steady paycheck are the ones most likely to become entrepreneurs. It makes entrepreneurship even less accessible. This is not a new problem, and it affects immigrants, people of color, and anyone from an underprivileged background most substantially.
One thing I’ve learned from the more than 1700 startups in our community is that entrepreneurs who climb the steepest hills are also the grittiest, scrappiest, and most dedicated. Multiple studies across the ecosystem have demonstrated that women founders outperform. For example, the Boston Consulting Group found that women founded companies generate twice as much revenue for every dollar you invest in them. San Francisco-based First Round Capital reported back in 2015 that the women founded companies in their own portfolio were outperforming the men by 63%. I could go on.
Smart investors should pay attention and seek out women founders even more fervently than before. Beyond very real issues of equity that were uncovered in our survey, it’s also clear that with great disruption comes great opportunity. Many of the titans of today’s economy were launched between 2008 and 2010, during the Great Recession—companies like Uber, Instagram, Whatsapp, AirBnB, Venmo, Slack, and Square. That’s why I’m confident that the most exciting companies in a generation will have started out this year and next, in the hardest of times. My money is on the women running them.
Leslie Feinzaig is the founder and CEO of the Female Founders Alliance.