Healthcare technology designed to target a wide range of women’s issues is less likely to get funding if there is a woman on the founding team, according to research.
Female founders of femtech products – short for female technology – are also less likely to secure funding if they use “advocacy” words in their funding applications, including “women’s rights”, “take control” or “freedom”, the analysis showed.
Male femtech founders, however, can benefit from increased investment if they use the same words, found Ludovica Castiglia, a researcher working in partnership with FemHealth Insights, a consultancy firm specialising in women’s health and femtech.
“The depressing message is that even when you’re working in an area where 75% of companies are founded by women, and you’ve developed a product aimed specifically at women, having a woman on your founding team – even when she’s paired with a male counterpart – damages your chance of getting funding,” Castiglia said.
“Instead of regarding female entrepreneurs in one of the most female-dominated sectors in the startup world as a positive, potential investors frequently see them as a negative and withhold funding as a result,” she said.
The findings have been described as “deeply demoralising but not surprising” by funders who specialise in supporting female startups.
Sarah Turner, a co-founder and the chief executive of Angel Academe, the UK’s leading women’s “angel” network – investors who invest their own money in a small business in exchange for a minority stake – said there “must be some structural bias” in funding institutions because there was “nothing wrong with the women we see seeking funding for their fantastic business ideas”.
She said: “I despair of the victim-blaming attitude that says the problem lies with female founders and that they need more mentoring and training. The truth is that women are just less trusted than men by investors, most of whom are also men, even in an area where you think they have an inbuilt advantage.”
Turner pointed to Flo Health, a period tracking app that recently became Europe’s first femtech unicorn after raising a record $200m.
“Flo is founded by two men,” she said. “I see ideas just as good as theirs every day that are founded by women, but they can only get tiny bits of funding here and there, and so don’t have the chance to grow their business in the same way as Flo has.”
Kirsten Connell, who leads a team funding early-stage startups for Octopus Ventures, said: “Femtech might be for women, by women, but the funders are still largely men who don’t understand the scale of the problems femtech sets out to solve or the incredible financial returns on offer.
“These gendered assumptions feed into men getting more funding, even if they produce femtech products and use the same words.”
Castiglia’s research reveals that since 2010, on average, female-founded femtech companies in the UK, US and Canada have raised 23% less capital for each deal compared with similar, male-founded companies.
On average, femtech companies exclusively founded by women receive 28% of venture capital funding, compared with 38% of the funding won by femtech companies founded entirely by men. Just over one-third of funding went to companies funded by mixed-gender teams.
Until now, analysts had assumed that female entrepreneurs do not face gender bias from funders in sectors traditionally associated with women. But Castiglia suggested that funders looking at female founders of women-targeted companies tended to attribute them with ideological rather than economic motives.
Castiglia analysed 1,720 funding agreements made by 513 venture-backed femtech companies in UK, US and Canada for her study, The Cassandra Curse: The Liability of Identity-Issue Fit in Femtech. She found that a “shocking number” of cases of femtech companies run by women received less financing compared with similar companies run by men.
One of the most damaging things a female founder of a femtech company can do, Castiglia discovered, is to use words in their funding pitch or company publicity that suggest they champion their product’s cause. Examples of these words include “dignity”, “discrimination”, “empower”, “equality”, “feminism”, “gender gap”, “inclusive” and “social change”.
“This may happen because women advocating for women’s rights are seen as being emotional, upset and angry rather than businesspeople maximising profits,” she said. “Men, on the other hand, get more funding if they use the same words, perhaps because investors see it as self-interested advocacy, and so proof of their economic acuity.”
Castiglia also conducted an online experiment by submitting identical startups to participants with investment experience, with the pitch coming from fake founders of different sexes.
“When the femtech idea was pitched by a woman, the investor admitted they saw the founder more as a feminist who prioritised social impact at the expense of financial returns than the man. This perception may explain why investors tend to award less funding to female funders of femtech companies,” she said.
Dr Brittany Barreto, the founder of Femhealth Insights, said lack of funding was one of the most significant challenges that femtech companies faced.
“Gender bias in funding is a primary barrier to femtech innovation,” she said. “This research is really important. It proves that even when it comes to women’s bodies, investors trust men more than women to get the job done.”
