Female Founders Way Behind Males in Capturing Latin American Startup Investment

A study by U.S. fund Harlem Capital reveals that startups founded by women in Latin America received $38M in investment in 2021, compared to the $13B injected into companies launched by men

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May 24, 2022 | 06:01 PM

Have women startup founders benefited as much as men from the region’s venture capital boom? The answer is a definitive no, according to research by U.S. fund Harlem Capital, which reveals that startups founded by women in Latin America raised $38 million in 2021, compared to the $13 billion raised by companies founded by men.

Mixed-gender teams also lag behind, raising $3.9 billion, an amount three times less than startups whose founders are exclusively men.

“It’s a big gap where female founders compete for three times the amount of capital as mixed-gender teams, and where all-male teams raised 345 times the capital of all-female teams. That was the first big finding,” Gabby Cazeau, a principal at Harlem Capital, a New York-based fund focused on investing in early-stage startups, tells Bloomberg Línea.

Cazeau said part of reason for putting together the report was “to learn about the region, and identify and find more women founders to invest in. So we are only at the beginning”.


After analyzing a total of 820 Latin American-based companies that disclosed fundraising information in 948 funding rounds in 2021, the report found that, of those, 128 startups were founded or co-founded by women.

The report was compiled using Harlem Capital’s proprietary database, and those of Crunchbase and Pitchbook.

By percentages, of those 820 companies, 82% had male founders, 12% had mixed gender founders, and only 4% were founded by women.

Venture capital investment in Latin America in 2021dfd

The Harlem Capital study, led by Cazeau, also shows other variables that evidence the gender gap, one of which is all-female teams only raised capital in the pre-seed and seed stages, compared to all-male teams that raised capital at all stages of funding.

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Another of the study’s finding highlighted by Cazeau is that mixed teams perform better. She said that all-female founders accounted for 4% of the companies that raised capital, but who received only 0.2% of the total venture capital funding, while mixed-gender founders accounted for 12% of the companies and received 23.2% of the capital raised in 2021, almost double the share of all-women founders.

Also, female founders were found to receive funding, but mostly when they also had male co-founders.

That may be the case with proptech unicorn Habi, which has a team of mixed founders, Sebastian Noguera and Brynne McNulty Rojas. The two entrepreneurs raised a $200 million Series C earlier this month from investors such as Softbank, Homebrew, Tiger Global and Inspired Capital.


And regarding the industries, 59% of the companies co-founded by women are in the financial services sector, software, agriculture and biotechnology, and companies in the financial services sector received 43% of the capital raised by women co-founders.

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While Latin America spans 33 countries, startups are concentrated in only a handful of markets. More women co-founded companies in Brazil than in any other country in the region, and female-founded startups in Brazil and Mexico combined received 91% of the capital raised by female-led companies.

Brazil and Mexico accounted for 57 and 27 capital injections respectively, raising $2.41 billion and $1.42 billion respectively.


They are followed by Colombia and Argentina, in terms of the number of investments in startups, with 15 and 12 investments respectively, raising $209 million in Colombia and $40 million in Argentina.

Questioning Cazeau on whether the gap in capital raising between male- and female-led firms is wider in the region compared to others, she said that in the U.S., female-founded firms raised about 2% of venture capital funding in 2021.

“The gap is equally large in the U.S.,” she said.

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A total of 383 investors invested in 151 financing rounds with female and mixed-gender founding teams last year, and leading the way were 43 investors who made three or more investments. The list includes investors from Latin America and the United States, led by Y Combinator, Kaszek, Magma Partners, Clocktower Technology Ventures and DOMO Invest.


Another mixed team is that of another proptech, Mexico’s Casai, launched by Maricarmen Herrerías and Nico Barawid, and which in 2020 received a Series A round in which Kaszek participated with $48 million, one of the largest rounds at that time for a Mexican startup at that stage.

“Little by little, certain venture capital firms are looking for women’s companies to invest in, and little by little more channels are opening for female entrepreneurs, for example there are forums and workshops for female entrepreneurship,” according to Casai’s Maricarmen Herrerías, and who has received investment from funds such as Monashees (ranked 11th on the Harlem Capital list) and Andreessen Horowitz.

Herrerías tells Bloomberg Línea that her Series A was led by Andreessen Horowitz, and that her contact with that fund was also a woman. “I think that, also, little by little, within the funds the dynamic is changing, more and more you start dealing more with women than men.”


“We have the great advantage that the funds that are in our portfolio are very aware of the ecosystem and have decided to invest with us because of the product, and also because of the team, they love that a large part of the team, of the leaders, is made up of women,” Herrerías said.


Harlem Capital’s Role

Harlem is still a fledgling private equity fund. Cazeau says that it launched in 2019 and of its two funds they have invested 40% in startups founded by women. That is, around 20 companies with female DNA.

Harlem Capital’s mission is to invest in 1,000 diverse founders over the next 20 years.


“I will focus on investing in women and underrepresented founders in the U.S., Africa and Latin America,” Cazeau says.

And while she points out that the scope of their investments is still small, they also want to invest in the Latin American entrepreneurial ecosystem. Their first investment was in the startup Turbodega last year, a software management tool designed to digitize the supply chain.

Harlem Capital is currently focusing mainly on a small number of industries: “Software, e-commerce and Web 3.0, things like cryptocurrency and blockchain, so our goal is to invest in diverse female founders, and founders in the region who are at the seed stage. So we invest between $1 million and $2.5 million”, she says.


A Bright Future?

And although the financing gap is huge, female founders are receiving more venture capital than in the past.

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But there are still challenges, the biggest of which is access to capital.

“Venture capital is very network-driven, and when people are left out of those networks, it’s hard to get access to that capital,” Cazeau says.


“I think there needs to be more diversity in venture capital funds to fund women founders when they start businesses, and I think there also needs to be some education about who the actual women founders are, how they’ve started their own companies to encourage other women founders who have an idea, to show them that they can also take the initiative and start their own companies. So I think there is an education gap, a network access gap, and a capital gap, but also a visibility challenge,” she adds.

The report recommends three actions for the ecosystem in Latin America to better support women founders: more transparency in the ecosystem, better data on fundraising and valuations for women, and greater diversity in venture capital funds.

And in particular, Cazeau says that at Harlem Capital they believe “in the power of sharing stories about amazing women founders, what they have done, and what they have built, to encourage others.”

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Translated from the Spanish by Adam Critchley