How women-led venture capital funds benefit women-owned startups

Women are increasingly investing in startups founded by women.

Despite a challenging fundraising environment, women-led venture capital funds made gains in 2023. According to research by Venture Capital Journal, women-led funds’ share of total fundraising increased to about 3% of the $107 billion raised last year by venture funds worldwide, up from less than 2% of the 2022 total.

While it’s a small fraction of the total pool, venture capital funding in the U.S. for companies founded by women has been trending up in recent years. The upswing has had some help from the creation of incubators for women founders, more new companies founded by women and more venture capital funds focused on underrepresented founders.

“The access to wealth that women have in the U.S. today is really at a historic level. We have about $25 trillion of wealth in the U.S., and we’re approaching 50% of all wealth being owned by women in the U.S. And that wealth is power if we use it,” said Portfolia founder and CEO Trish Costello.

Portfolia creates and manages about 16 venture funds designed for individual investors who want to invest in a portfolio of mostly women-led startups and want to learn more about venture investing. The firm has investments in over 140 companies, most with women founders. 

“It’s all about putting our money behind the companies that will enhance our lives and provide us those returns,” Costello said.

While roughly 75% of the firm’s portfolio comprises companies with women CEOs, Costello said, about 25% are led by men and are aimed at solving problems for women, including a male-led company, YourChoice Therapeutics, that is developing a birth control pill for men.

One of the beneficiaries of increased interest in investing in underrepresented founders is NasaClip, founded by Dr. Elizabeth Clayborne, an emergency physician and mother of two. She developed a device to stop nosebleeds after treating patients in the emergency room, recognizing the need for a hands-free first-aid solution. 

She said the startup has raised $3.25 million in funding in the last four years, mostly from women investors. The funds enabled her to bring the product to market and her company is now bringing in revenue, she said. 

“When women invest in women, they also bring to the table more than just capital; they’re introducing the social network that is needed to be successful,” Clayborne said. “I don’t think I would have actually gotten off the ground at all, if I had not been believed in early on by female investors.”

Costello said her desire to lead a women-focused venture capital firm was born a decade ago after a male colleague told her that men wouldn’t invest in women’s health issues because of what he called the “ick factor.” 

“I realized that there was a whole area of investment that could have great returns and that women were actually very comfortable with putting their money behind,” said Costello.

Portfolia launched its first fund in 2015, and part of its mission is to train the next generation of venture capitalists. While its fund managers make the investment decisions, investors are invited to pitch meetings and to work on due diligence, so they can ask questions of the entrepreneurs and offer their insights.

“Everything that we do is to use our communities and our knowledge and our expertise to both invest and to make this company successful,” said Costello. 

Investors in Portfolia funds must be accredited, which the U.S. Securities and Exchange Commission defines as individuals having a net worth over $1 million, excluding a primary residence, or income over $200,000 a year ($300,000 for a married couple) for the last two years and a reasonable expectation of earning the same for the current year.

The average investment in a Portfolia fund is $35,000, and investments may be as much as $500,000. The minimum investment is $10,000 — and each fund invests in 10 to 12 companies.

“We let them dip their toe in and basically give it a try and see what venture investing is all about,” Costello said. 

Venture investing is high risk, but with the potential for high returns — and research has shown that women-owned startups deliver twice as much per dollar as men.

Still, investments are illiquid and can take several years to generate any return. Many startups fail. So, financial advisors generally recommend at most 10% of a client’s assets be in high-risk investments. 

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