Female founders are held to a higher standard of traction. They get less funding than men for building the same product — even in female categories such as beauty and femtech. Sadly, more female VCs doesn’t mean more funding for female founders, especially those of color. Research suggests a “Queen Bee Phenomenon”: women in male-dominated sectors have incentives to distance themselves from less-powerful women to improve their status. This helps explain why female senior venture capitalists would hesitate to fund women-led startups.
Despite the harsh fundraising reality, there are some female founders who are quietly crushing it. You don’t hear about them because they don’t have top-tier VCs backing them or in some cases they have not raised any VC investment at all. They have spent no money on PR. This shouldn’t be a surprise given that many female founders of color are not connected to VCs, don’t get taken seriously, and don’t get as much funding or any funding as revealed by a recent DocSend’s Funding Divide 2024 Report. Even still, many female founders of color do build differentiated products, generate revenue, and reinvest in their businesses.
No Pity Needed: These Diverse Female Founders Achieve Far More With No Venture Funding Or Much Less Than Competitors
- While Adam Neumann turned $13B into $360.9 million, Rumaiza Ali, Cofounder of Wedy, turned $285,000, which was raised in tranches, into $1.7M in gross revenue.
- Renuka Apte, founder of Clockwork, a company building a platform for real-world robots, raised the smallest seed round compared to all her (male) competitors in the sector, and Clockwork is the only company that has a fully functioning autonomous manicure robot that is generating revenue with multiple license deals in place.
- Divya Gugnani, Founder of 5 SENS, self-funded and incubated the brand with a seasoned team and $400K; 5 SENS has an exclusive distribution partnership with Sephora and has reached multi-million in sales and is break-even.
Rumaiza Ali, CoFounder & CEO of Wedy
SHARK TANK – ̉Hopeful founders enter the Tank to present Sharks with an app that simplifies wedding … [+]
Wedy is a SaaS enabled marketplace that aggregates unstructured wedding industry data, allowing high-ticket businesses like venues, photographers, and caterers to be bundled into an all-inclusive package with one contract and a transparent price tag. With $285K received in tranches through small checks of $25K spread over several months, the founders focused on being capital efficient to build their product and quickly unlocked their go-to-market strategy to generate revenue through organic growth. In the last year, Wedy achieved $1.7M in revenue, with 3x YoY growth and over 1,600 vendor services booked
Rumaiza Ali, Wedy’s co-founder and CEO, has put in the sweat across every aspect of the company — from being the lead UI/UX designer and spearheading product design, to scaling supply acquisition, launching new markets, generating B2B sales, managing digital marketing, and leading customer acquisition. Co-founder & CTO Anas Ali built pricing software for airlines and launched over 100 markets. Anas leveraged his engineering expertise to build Wedy’s booking engine and developed the first-of-its-kind AI-powered dynamic pricing for wedding venues and service providers.
Wedy’s founders pitched on Shark Tank and performed the world’s first Shark Tank wedding, with Kevin O’Leary as the officiant. After their appearance on Shark Tank, Wedy had a waiting list of 2,800 vendors and received requests for expansion to cities like New York, Orlando, Chicago, and more. Most recently, Wedy was part of Techstars NYC’s Spring 2024 cohort and added Jared Simon, Co-Founder of Hotel Tonight (acquired by Airbnb), to its Board of Advisors.
Last year, there were 2.2 million weddings in the U.S. alone, contributing to a $72 billion opportunity within the U.S. wedding industry. While Wedy is doubling down on the multi-billion dollar wedding industry, the company plans to expand into the ‘Ecosystem of Love’ — capturing life’s next big milestones, from honeymoons and the baby sector to other celebratory events.
Renuka Apte, Founder & CEO of Clockwork
Male founders raise more than female founders for building – or trying to build – the same products. Case in point, four different startups raised venture capital and tried to launch manicure robots: Coral, Clockwork, Nimble and 10Beauty. Per Pitchbook data, Clockwork raised the least amount in its initial seed round. Coral shut down and never built a product. Meanwhile, Nimble has yet to deliver the manicure robot that I pre-ordered via its Kickstarter crowdfunding campaign over 3 years ago. 10Beauty has yet to launch a product in the market and raised the most VC funding, a whopping $40M+.
Customer selects nail polish from Clockwork’s palette.
Clockwork, founded in 2019 by Renuka Apte and CTO Aaron Feldstein, leases robots to brick and mortar businesses to increase the value of their space, attract and retain customers, and increase dwell-time and sales. Clockwork has 24 robots at iconic locations across the US, including skyscrapers like Rockefeller Center, universities like UC Berkeley, and multiple international airports. Beyond the launched locations, their contracts represent over $3.1M in ARR. Their customers are big names like corporate real-estate giants Tishman Speyer, Pembroke, and Hines, travel retail giant Paradies Lagardère, global airport spa XpresSpa, and more, many of whom have expanded contracts with them. Consumers love the service because it gives them an express and affordable option that can conveniently fit in their busy day.
Clockwork’s manicure robot uses high precision computer vision and AI that works at sub-millimeter accuracy to deliver a perfect coat of polish. The machine’s cameras takes a 100 images in seconds and builds a high-resolution 3D map of a person’s nail. They developed novel neural networks and algorithms to decide a “path plan” for the nozzle-like end-effector to follow across a customer’s nails. It dispenses a precisely calculated amount of polish onto the nail taking into account the slope and curvature of people’s fingers, minor movements that humans tend to have, and the viscosity and rheology of a non-newtonian fluid like nail polish. The whole process takes about 10 minutes. While the robots deliver a polish change today, Clockwork has demonstrated the full manicure experience and gel using the same hardware, which they hope to launch in the future.
Clockwork started with manicures, because it’s a multi-billion dollar industry with a ton of latent demand, but the platform they’ve built can be extended far beyond nails. “Before your platform can be the foundation of someone else’s entire business, it needs to earn credibility. When people think of real-world robots, they focus on AI, but there’s a lot of infrastructure for deployment, servicing, and support that needs to be put in place. Amazon built their books business before ever venturing into selling AWS,” said Apte.
Apte is currently fundraising to accelerate growth since Clockwork is experiencing a surge in B2B corporate customer orders. Regardless of whether the raise is successful, I am certain that the technology and product she built will be an attractive acquisition target to a trove of multinationals in the vertical and adjacent verticals.
Divya Gugnani, Founder of 5 SENS Fine Fragrances
5SENS ads in Miami’s Design District.
Divya Gugnani, a serial founder and investor, received lot of inbounds from investors especially after 5 SENS, a fine fragrance brand that creates clean, sustainable eau de parfums, launched in Sephora, but she wanted to establish strong product market fit before taking in any outside funding. “I feel strongly about not taking funding early on. It changes your discipline of how you run the business. If you have it, you will end up spending it. When you don’t raise it, you don’t spend it, ” stated Gugnani.
5 SENS launched DTC last December 2022 in beta then officially launched DTC in January 2023. It launched with an exclusive retail partnership in Sephora in May in 2023. Gugnani said having a strong retail partner is a foundational strategy. So far, the brand’s ‘IN TOO DEEP’ fragrance has sold out four times at Sephora. Its Ipsy partnership was also part of strategy. The brand story was shared via Ispy’s fragrance enthusiasts and influencers. Ipsy’s subscription boxes served as a trial and discovery process which was a very effective method of customer acquisition. 5SENS’s unique positioning as a clean fragrance brand that captures your mood, bottled, sets it apart. Its long lasting and sophisticated fine fragrances offer accessible luxury and empower users to express themselves through scent.
Divya Gugnani, Founding Partner of Concept to Co.
Gugnani has personally backed 76 companies with her investment vehicle, Concept to Co., and many more from her previous career as a professional investor at FirstMark Capital, Pequot Ventures, Millennium Technology Ventures, iFormation Group, and Investcorp. As a investor and five-time founder, Gugnani says she is constantly learning and getting exposure from founders, deal flow, and investments. Learning from all the success and mistakes of other founders and companies has allowed her to be more capital efficient. “When you are bootstrapped, you have to become a ‘learn it all’ person.’ You need to surround yourself with peers, mentors, advisors. It comes down to people that you hire to turn your vision into a reality,” said Gugnani.
Gugnani invested $400K in the brand personally and has been reinvesting with revenue generated. 5 SENS has multi-million in sales and is break-even. Now that product market fit has been established, Gugnani is contemplating raising outside capital to scale. Additional capital will allow her to scale faster in beauty’s hottest new category – clean fragrance.
The Path – Build Slowly With A Strategic Business Model, Stay Default Alive
Wedy, Clockwork, and 5SENS are “default alive,” meaning their startups are on the path to no longer needing capital from outside investment. By contrast, if your startup is “default dead,” it means you need to additional funding in order to keep your business running.
The concepts were coined by Paul Graham, legendary entrepreneur, investor, and founder of Y Combinator. When evaluating startups, he first asks, “Are you Default Alive or Default Dead?” Based on current expenses, growth rate, and cash on hand, Graham wants to know if the business is on the right trajectory to reach profitability before running out of money. For founders who know the answer to the question, it’s a sign that they take monitoring progress seriously, which is critical to success. With the former, they can talk about new ideas and growth strategies. With the latter, the conversation turns to how that business can avoid death.
Although Wedy’s Cofounders are fundraising right now, they aren’t desperate for cash. Ali stated, “I’m continuing to hit marketplace benchmarks and traction points, building a defensible network effect. The numbers speak for themselves, but despite this, investors often struggle to have conviction in female founders. I’m doing my own comparables and am on the same trajectory as other successful companies, but at the cost of time.”
“With a capital injection, I could move faster, While many see the wedding industry as a one-time transaction space, we’re building recurring revenue relationships with our venue and vendor partners, who book over 120 events per year. Even with consumer economics, we’re capturing $25,000 to $30,000 per client, which is rare for startups. For those impressed by a $1,000/month SMB SaaS subscription with a three-year retention rate, consider this: we’re capturing that value in a single transaction with our clients, and we’re seeing AOV trend upward!” exclaimed Ali.
A Harsh Reality For Diverse Female Founders
Holly Neiweem, Founder and Managing Partner of Apprentis Ventures, states, “The arbitrage opportunity for investing in female-founded consumer brands is great. Women-led businesses are underfunded, yet overperforming, creating an opportunity to earn outsized returns.”
Less than 1 percent of venture funding is going to diverse audiences, and even less than that to Black women. Black founders echo the stats put forth by investors, and say that there is waning interest in their brands from the financial community despite the viability of their businesses. A recent WWD article titled Who’s Afraid of Investing in Black-owned Beauty Brands? How the Beauty Industry Is Failing Black Entrepreneurs revealed that Black female founders cannot get funding even when there is a massive TAM for their products, when they have proven product-market fit, and when they have a PO from Sephora, Ulta or Target.
Forvr Mood, which makes both fine fragrances and candles and is sold at Sephora, is expected to surpass eight figures in sales this year, and sold more than 30,000 units of product in its first week. “We’ve been fully self-funded, we’ve never taken any outside investment whatsoever. We have the growth, numbers that predict the trajectory of what is far beyond exceptional,” Cofounder Jackie Aina said. “Despite the success of the brand and the buoyancy of the fragrance category overall, raising money has been an uphill battle. A lot of investors we spoke to were excited about the business, and then went ghost.”
Exploring Other Options: Acquisitions and Acqui-hires
Although acquihires are often fire sales, sometimes selling a startup as an ‘acquihire’ can be easier than fundraising and more lucrative for founders than growth funding since founders are less diluted. Some buyers want the proprietary technology and not the people. Some buyers who are larger competitors want the company’s customers, not the tech or the people. Some buyers want the people who have specialized talent. Sometimes, it might be a mix of two or all three elements, and selling the startup is a great outcome for the founders.
“The world of M&A is based on what has happened and where an acquisition target is because of it. Buyers like to see that companies have taken risks and what those results were. Multinationals aren’t just buying a company; they are buying their history as a form of R&D. Because of this, there isn’t as much gender bias. Results are results and multinationals are focused on performance and fire power, ” says Claire Gunter, an M&A broker. Gunter continued, “Also, big multinationals’ goals are more aligned with those of bootstrapped and minimally funded founders. Companies with VC investors at their cap tables are looking to maximize monetary return and are on the fund’s schedule. By contrast, bootstrapped founders are trying to maximize the longevity of the business they have built. Given the opportunity, they will take less on the front end if it means a larger share of the market and their continued participation. This is why we are seeing more exits from these un/underfunded companies. Smaller teams tackling niche problems with specialized products are seeing a lot of interest and buyers. Acquisition is the new IPO. For example, niche CRM is a really exciting space right now. Do one thing, do it well, and capture that market. The goal is to get acquired.”
Acquihires can get leapfrogged in pay, stock, and seniority. A founder who recently sold his startup to a public company told TechCrunch that the buyer structured the acquisition so that the founders received a higher stock grant rather than paying more to his startup’s investors. Moreover, if the founding team didn’t get diluted much by VC funding, they also stand to make considerable cash from the exit, even if it’s only 4-6X multiple.
Conclusion
While venture capitalists often get captivated by charismatic founders, and the tech media and ecosystem celebrate companies for securing funding, fundraising is not the end game. The end game is to build a company strong enough to achieve a successful exit.
