As we bid farewell to summer and welcome the vibrant hues of autumn, we also witness a transformation in the startup fundraising landscape. This month heralds a fresh start, brimming with potential and renewed energy. It’s not just about returning to our routines; it’s an opportunity to embrace the season’s vitality as the business world shifts from the summer lull to preparing for new opportunities and crucial deals before the year concludes.
In this issue, we’ll delve into how fundraising shapes the startup ecosystem and provide practical tips to empower startups, investors, mentors, and other key players to navigate this diverse landscape. So, as you savour your coffee, let’s harness the potential of the fall and gear up for an exciting fundraising season ahead. Here’s to turning insights into action and opportunities into growth!
As we wrap up the summer period and move into Q4, this is a pivotal moment to reflect on the year's fundraising landscape. In Canada, a report by CVCA highlights that Q1 2024 saw VC investments total CAD $1.3 billion across 128 deals. This matches the investment levels of Q1 2023 but reflects a 28% decline in the number of deals, marking the lowest volume since 2021. Notably, the average deal size surged to CAD $10 million, a significant 47% increase from the previous year. This trend underscores a growing preference for larger, higher-quality investments over sheer deal volume.
However, amid these shifts, the representation of women-led and minority-owned businesses in this funding landscape remains concerning. According to recent data, women are massively under-represented among both venture-backed entrepreneurs and VC investors. According to a DocSend report, all-female teams raised 43% less than all-male teams, and diverse teams raised 26% less than all-white teams in 2023. Additionally, underrepresented founders receive considerably less funding. While the median investment for equity stands at $1 million, women-owned businesses receive an average of $213,000, and minority-owned only $185,000. Addressing these disparities is crucial for creating a more equitable and thriving startup ecosystem. By advocating for increased investment in diverse and inclusive businesses, we can harness the full potential of innovative ideas that have often been overlooked.
Despite being historically underfunded—with only 13% of digital health venture capital allocated to femtech—there are signs of rising investor interest. Globally, the femtech market is projected to reach $75 billion by 2025, fueled by advancements in fertility solutions, pregnancy care, and overall women's wellness. However, challenges persist, particularly in securing sufficient R&D funding.
In July 2024, Flo Health raised over $200M in Series C investments. "Reaching unicorn status is a significant milestone for Flo and the femtech industry," says Dmitry Gurski. "This investment accelerates Flo's mission to revolutionize women's health," said Anna Klepchukova, Chief Medical Officer of Flo Health. "With women spending 25% more of their lives in poor health compared to men, we're committed to changing this unacceptable status quo. We serve as a tool for preventive care and health education, helping our users recognize potential issues early and encouraging proactive healthcare management. With 1 in 4 US women using Flo, our platform is uniquely positioned to bring women's health into the 21st century, all while maintaining the highest standards of medical credibility, data privacy, and user trust."
Flo is a frontrunner in the rapidly growing femtech market, which has evolved from a niche sector with minimal venture capital a decade ago to a projected $60 billion industry by 2027.
Investors hold an influential role in shaping the future of innovation— mitigating bias in funding decisions is essential for fostering a more equitable ecosystem. Research shows that investors in 2022 spent the most time overall scrutinizing the team sections for all-female decks, averaging 125% more time on this section than for all-male teams.
Moreover, diverse teams face significantly more scrutiny than all-white teams in four key areas:
These biases create significant barriers, limiting opportunities for innovative founders who challenge the status quo. Despite this, ventures from diverse backgrounds often outperform expectations. Indeed, studies have shown that founders with greater gender and ethnic diversity achieve 30% higher returns for investors upon exit than their white male founder counterparts. Businesses founded by women generate more than twice the revenue per dollar invested compared to those founded by men—producing 78 cents for every dollar of funding versus just 31 cents for male-founded startups.
Given these disparities and the potential for high returns, investors should actively seek to diversify their portfolios. By addressing biases and reevaluating their investment criteria, they can unlock a wealth of creativity and innovation that has often been overlooked.
We believe the solution lies in implementing objective evaluation criteria that prioritize skills, potential, and execution over historical patterns or gut instincts. An innovative solution to address investor bias is the Peer Selection process, as implemented by Ross Baird, Founder of Village Capital. By integrating this peer-based evaluation method, biases can be reduced, and more objective assessments can be achieved. Additionally, investors who incorporate diverse viewpoints within their teams and continuously educate themselves on unconscious biases can ensure that groundbreaking ideas are not missed due to systemic inequities.
As the landscape evolves, Canadian startups and investors must adapt to remain competitive and seize new opportunities. Now is the time to challenge the norms and actively seek the transformative potential of diverse founders.
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As investors and board members, this risk-free scorecard is designed to provide insightful data on the cost of inaction and opportunities to drive a firm’s financial performance while improving the firm’s reputation.
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Here’s what we’ve been talking about lately:
The FemTech Breakfast Club in Vancouver: Head to our Linkedin for details. We recently announced our Jury members - Check it out!
Join us at this upcoming event, a pitch competition focused on bringing together and learning about the tremendous industry that surrounds women’s health.
Femtech Breakfast Club: Vancouver @ BDO’s office October 9th, 2024
This is an invite-only event. If you're interested in attending, we would love to see you there. Simply send an email to eloise@capinclusive.com to ask for a free ticket.