Peanut, the maker of a social networking app for women, is entering into the investing space with today's launch of a microfund called StartHER. As the name implies, the new fund will focus on investing in women, as well as other historically excluded founders "of all ages, life stages, ethnicities and sexual orientations," the company says. In particular, StartHER aims to tackle the difficulties specific groups have in raising their first capital -- something typically referred to as the "friends and family round."
Peanut argues there's inherent bias in assuming that every startup founder has access to what are, essentially, wealthy friends or family who can spare a little startup capital. These rounds often range in size from $10,000 to as large as $150,000 or more, and can make a difference when it comes to getting a new company off the ground.
"The assumption that founders should have networks able to invest in their businesses creates an unfair starting line for most groups. If we don’t remove barriers to that initial funding by providing access to capital, how can we ever hope to see a changing founder profile further through the fundraising funnel?” says Peanut CEO Michelle Kennedy, in a statement about the fund's launch. "Peanut’s StartHER fund opens the door to founders looking for that early funding. It’s our opportunity to finally level the playing field. We want to be the family these founders can turn to, opening the door to our professional networks too."
The lack of access to funds for female founders may have gotten worse during the pandemic. Crunchbase data indicates female-founded startups globally saw a 27% decrease in funding in 2020 as compared to 2019. The pandemic shut down access to in-person networking opportunities and disproportionately impacted the family caretakers who tend to be women, as schools, daycares and other childcare assistance businesses closed their doors. These changes may have contributed to the decline, though it's hard to pinpoint.
But even outside the pandemic's impacts, women are underrepresented in venture investing -- including on the firm's side. Only 13% of decision-makers at VC firms are women, which can influence what startups receive funding.
"It’s no secret that the venture capital industry is dominated by those with privilege and lucrative connections. As a member of the Female Founders Fund, I’m excited to be a part of StartHER’s investment committee to help these entrepreneurs, who have not been adequately recognized, grow their networks in the venture capital community,” said Anu Duggal, Founding Partner of Female Founders Fund, who joined SheHER's investment committee.
StartHER says it's looking to step in to fill that gap by offering small investments to early-stage, pre-seed businesses focused on making a positive impact on society, healthcare, or the environment. According to its online application, StartHER will write checks of between $25,000 and $50,000 -- likely one of the first checks a new startup may receive. The overall fund is $300,000 in size, and will make 3-4 investments in 2021. Peanut will not take an equity stake in the companies it invests in.
"Moving forward, we’ll be considering other factors such as deal flow to help inform how we invest and the companies we choose to invest in," explains Kennedy. We’re heavily focused on making the right investments that will have the most impact versus simply making returns. For StartHER, our goal is not to make X number of investments for X returns, but to diversify the VC funnel by serving as an entry point to capital for underrepresented founders," she says.
Along with Duggal and Kennedy, the investment committee for the fund includes journalist and angel investor Bérénice Magistretti; Chief Business Officer at Conde Nast Britain, Vanessa Kingori MBE; Founder of Shiffon Co. and Startup Girl Foundation, Shilpa Yarlagadda; and author, columnist and Brand Strategist, Elizabeth Uviebinene.
Applications are accepted on a rolling basis, and the committee meets every six months to consider the fund's applications. Beyond the investment, startups who receive SheHER funds will also be given access and office hours to the networks of the committee members, the website says.