(Toronto) Members of Canada’s tech community say they fear the recent downturn in the sector will weigh even more heavily on women running their own businesses, who already lag behind their male counterparts in funding.
Their fears come as the global tech sector is plagued by a wave of spending cuts and consumers revert to their pre-pandemic habits. The sector is also grappling with widespread layoffs, falling valuations and, as investor exuberance wanes, entrepreneurs are struggling to find cash.
“An investor used the phrase ‘it’s a bloodbath’ and […] I would say the funding environment is a disaster,” said Caitlin MacGregor, founder of Waterloo, Ont.-based recruiting technology company Plum.
It has been trying to get more funding since September, having previously raised 11 million. Although she is convinced that she will find the money she needs, she believes, like others, that many women will find it even more difficult than usual to achieve the same feat.
“Women get a smaller percentage of available capital, and then when that capital goes down, the share that goes to women gets even smaller,” says Ms.me MacGregor.
“This means that the percentage of companies that will fail because they did not obtain financing is increasing. »
Ontario data firm Briefed. In observed that Canadian tech companies raised $14 billion through 701 deals in 2021, when the market was still booming because companies expected their vigorous pandemic growth to continue. In 2022, investment activity fell to 9.7 billion, for a total of 417 transactions.
A smaller share of funding
The current year so far has raised $176.9 million in eight deals, but many believe 2023 will end with even lower investment than last year – and if past trends continue , women will reap only a meager share of the available money.
Women-owned businesses received just 2.3% of venture capital funding available globally in 2020, compared to 2.8% in 2019, data firm Crunchbase calculated.
“The market situation today is not going to help,” said Rhiannon Davies, general partner of Sandpiper Ventures, a Halifax-based seed venture fund that invests only in Canadian women-led businesses.
Early in the pandemic, she noticed a rush for capital, competitive deals and huge valuations, leading some companies to go public and some investors to sell for big gains.
The market frenzy has led to increased investment for women entrepreneurs and other underrepresented entrepreneurs, but Mme Davies points out that this increase has remained proportional to the wave of financing that the sector as a whole has seen.
“The proportions are not changing fast enough. We are not moving the needle,” she laments.
“There’s always a trend of token investment in women-led tech companies, as opposed to real change that would show that’s the direction we need to go. »
Birds of a feather flock together
Many attribute these token investments to backers putting money behind people they already know, or businesses that have followed the same path as others in which they have already successfully invested. Others believe that the names of top schools, employers or incubators that have already produced successful businesses and appear on an entrepreneur’s resume can also play a role in funding decisions.
Mme Davies sees this as investors clinging to “things they know” and “repeating the same patterns”.
Mme Instead, MacGregor calls it an “implicit bias.”
“They want to know if this person has worked in a technology company or in the sector in which they are starting a company. Has she ever raised funds, has she ever managed to leave a company? she observes.
“When women start out, most of the time they don’t necessarily fit the model from the start. »
They are also less likely to request funds from like-minded investors. Women made up just 19.4% of Canadian venture capital partners in 2019, according to diversity data firm Diversio, and 27% of Canadian angel investors in 2021, according to the National Angel Capital Organization.
Women who started a business are twice as likely to invest in a female-led start-up, according to research from the Silicon Valley-based Kauffman Fellows program.
To address the lack of funding, several venture capital funds only target women-led businesses, but Mme Davies notes that they are inundated with hundreds of requests and often can only support about ten.
“There’s tremendous demand, but it’s a huge amount of work for an investor to really assess effectively and not leave any founder feeling left out. »
An unfavorable context
Toronto entrepreneur Liza Akhvledziani failed to woo funds targeting women business founders when she launched her Chexy rent payment platform in late 2021.
“Perhaps because they are overloaded with the demand for other female founders and there are just fewer of them,” she wonders.
She eventually raised money from seed investor Antler, but before she got that backing, finding someone to lay down some money was a “tough job.”
Mme Akhvledziani believes her difficulties do not stem from being a woman, but from the recent market downturn that has exacerbated the general lack of funding and Canada’s resistance to supporting start-ups.
“There will be a lot fewer people ready to write checks from now on,” said Ms.me Akhvledziani.
“It’s not like they need to spend that money […] as they lose money in the stock markets every day. »
Although she is jealous of the higher capital rates prevalent in the United States and disappointed with the difficulties many company founders face in bringing their ideas to fruition, she still sees Canadian start-up success on the horizon.
“Big business models and big teams will always be funded,” Ms.me Akhvledziani.
“If we can raise (funds) and execute (our business plan) well in this macroeconomic climate, it means that when the tide turns, then it will be even better for us and we will excel. »