How Female Founders are Navigating through COVID

Female Founders Fund
Female Founders Fund
8 min readJun 24, 2020

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Illustration: Dom Guzman

In the wake of COVID-19, the past four months have brought a wave of challenges and opportunities for female founders. Early-stage startups are, by their very nature, more vulnerable to negative economic downturns, and the coronavirus crisis has affected startup founders across the board.

Regardless of stage and sector, founders are uncertain about their companies’ futures, especially as 75% of economists predict a global recession in the year to come, per The Washington Post. Considering that female-founded teams received less than 3% of capital in 2019, there is growing concern that the economic impact of COVID-19 will disproportionately affect women-founded startups. Pitchbook reported that “deal activity maintained momentum in the first quarter of 2020 amid the economic downturn, which will almost certainly slow activity through the rest of the year.”

At Female Founders Fund, we are still actively partnering with founders and committed to supporting our ecosystem of female founders through the crisis. This spring, we conducted a survey across 111 venture-backed female founders with the goal of providing visibility around the challenges faced by founders today. We hope these findings help provide a sense of “what’s normal” for the female founder community during this time.

Breakdown of Survey Respondents by Stage and Industry

As expected, the vast majority of startups have experienced a decline in revenue projections for the next year, as consumers facing unemployment tighten their purse strings.

Of the companies surveyed, almost two thirds (62%) reported decreased revenue projections.

Of the 22 companies who reported that their revenue projections decreased by more than 50%, 12 are either consumer or ecommerce companies. One founder of a fitness space wrote, “prospects for growth have gone away.” Other companies that saw decreases over 50% were either entertainment companies or physical spaces, since film productions are postponed indefinitely, and stay-at-home orders prevent use of fitness studios, members’ clubs, and coworking spaces. With the closure of nonessential businesses, retail is restricted to curbside pickup in many places, eliminating opportunities for experiential retail. Most founders are asking themselves if their products and services are “essential” to customers right now, and are working swiftly to adapt their offerings where possible.

In order to adapt to our new reality, some founders noted that they’ve been looking at additional revenue streams or product offerings, and amending their business strategies.

“We totally shifted from a ‘growth-at-all-costs’ strategy to modest growth with a clear path to profitability,” said the founder of a prominent DTC brand. “Pop-up shops and next generation retail are no longer a differentiator or key component of our brand,” she said. Her brand will need to pivot to virtual product styling, for example.

Others, particularly apparel brands, have entered the burgeoning mask industry. “We pivoted our on-demand workforce into making masks and have made +$30K/month doing so, which has largely covered overhead,” one founder wrote. “What we are concerned about now is finishing our current raise so that we have a lot of runway coming out of this crisis.”

On the flip side, the pandemic has presented new opportunities for some, with 20% of startups reporting increased revenue projections.

All of these companies are direct-to-consumer in the wellness space — think sexual wellness, alternative adult beverages, supplements — or companies bringing services into the home, like orthodontia, haircare, and home fitness.

“Overall, we are seeing great awareness and desire for our market and therefore innovating specifically to economic parameters and predictions such as price and value,” said the founder of a supplement company.

Of the companies reporting increased revenue projections, 40% of founders reported an increase of 50% of more. While that’s good news, the surge in demand presents new obstacles. “We had a surge in users after the lockdown,” said the founder of a mobile app. “We’re concerned about maintaining that user base and growth momentum.”

For younger companies, especially, it’s been tough to adapt to that demand. “We are omnichannel and it’s been interesting to see a spike in retail and Amazon at the beginning of COVID,” the founder of a Series A wellness company said. “Now CPAs are plummeting and our DTC is really taking off. My biggest concern is keeping the supply chain steady and building enough inventory, in case something is disrupted.”

“Given we’re in the care-at-home/wellness category, we’ve seen an over a 50% increase in sales and a consistent 4x sessions on site and social,” said the founder of a haircare company. “We’re taking it day-by-day, given that we’re three months old, but we’re planning into this new behavior and growing with our customer while she takes care of her hair at home.”

Revenue projections remain unchanged at 18% of companies surveyed.

Of those companies, 65% are consumer or ecommerce, all with products or services that can be used at home.

Revenue projections only remain unchanged if demand stays the same, so staff at companies seeing increased demand and stagnant revenue are finding themselves spread thin.

“We’ve seen an uptick in applications so trying to balance onboarding more members but not adding more headcount to support them has been tricky,” said the founder of a pre-seed company that builds local communities in an effort to combat loneliness. (Which, for people isolating alone, could be a game-changer.)

In order to compensate for decreased revenue and plan for the uncertainties of the next 6 to 12 months, all of the founders surveyed reported changes to their budgets.

The majority of female-led startups are reducing spend on Marketing/PR (58.6%), but headcount (46%) and rent/facilities (43%) also composed significant budget cuts. Since a third of companies surveyed employ 1 to 5 staffers, they likely use shared workspaces or coworking facilities, which closed their doors to comply with states’ stay-at-home orders. Many founders paused or ended their contracts with these facilities.

Overall, 51 companies reported reducing headcount with layoffs and furloughs, including roughly half of Seed round companies and 40% of companies Series A and above.

At each of the growth-stage companies that furloughed or let go employees (Series B and above), executives also took management pay cuts.

(Surprisingly, there were 5 companies that started hiring during the pandemic; two of them reported increased revenue, two reported unchanged revenue, and one reported over a 25% decline in revenue.)

Because the COVID-19 crisis is open-ended, it’s difficult for founders to plan for the months ahead. Will states be following stay-at-home-orders until the end of the summer? The fall? Spring 2021? While NYC prepares for Phase 2 of reopening, California has announced that its public universities will remain closed through September, and Dr. Anthony Fauci predicts a second wave of infections during the winter.

Beyond business challenges, child and elderly care has limited founders’ abilities to work during the day.

A similar report released by 500 Startups showed that a third of female founders indicated that running a company while taking care of family members at home has been “very difficult” or “impossible” to manage.

“Assisting and supporting team members dealing with childcare whilst working” has been a priority for one of our founders, too, since some of her staff have partners who are essential workers, she said.

Some founders — including those at media and data companies — indicated that their next phase of strategic planning will include provisions for a recession, or be geared entirely for recession or depression.

Compared with fundraising and hiring/firing employees, most female founders are concerned with extending their runway to ensure their survival.

Overall, our respondents reported a range of runway lengths. Just over half (51%) of respondents reported over a year of runway, 22% with more than eighteen months.

Our results aligned with those of the 500 Startups report, but in that survey, roughly 70% of respondents reported six months of runway or less, and 56% were Pre-Seed.

The majority of our respondents were Seed round and beyond, and reported significantly more runway. Their concern about extending that runway reflects the belief that it will be more difficult to raise a round or a bridge if necessary over the next eighteen months.

In fact, nearly half of our respondents won’t be fundraising at all over the next year: 40% of companies Series A and above are holding off on fundraising until after Q2 2021.

Interestingly, a significant number of female founders closed a round during the pandemic; 27% have closed a round since January 2020, while 14% have closed a round since March, when many of the stay-at-home orders went into effect. (Several of these companies are still hiring new employees.) Four of these companies are in the healthcare sector (three of which are beyond Series A), while seven are consumer companies that are stay-at-home-friendly and wellness-adjacent.

Beyond the companies that already closed a round, 17% of companies Series A and above plan to pitch new investors this year, as will 53% of Seed companies. However, a few founders noted in the comments section that they’re unsure these pitches will be successful, given the uncertainty in the market.

The industry is already seeing valuations being impacted. Law firm Cooley LLP reported that 16% of venture transactions in April were down rounds, the highest since Q4 2016. Rounds have also slowed down due to economic uncertainty, depressed revenues, inability for funds and founders to meet in person, and the increased focus of VCs on their existing portfolio companies’ health. Based on our survey, most investors are checking in monthly (55%), while a significant number are checking in weekly (22%).

In closing…

The COVID-19 pandemic has upended life as we know it, and female-led startups are in the early days of navigating the new normal. Despite the rocky road ahead, there are a few silver linings: historically, times of crisis fuel innovation, there is ample dry powder in the market, and due to these new constraints, companies will learn to be more capital-efficient than ever.

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