Investing in women founders is good business, says diversity-focused SoGal Ventures

Recession Run is a series where we talk to Southeast Asia’s investors to suss out the opportunities they see this funding winter.

Startup founders who are women and those with minority backgrounds have always had it tough. But the going’s gotten tougher in the past year as VCs tighten their belts amid this economic crisis.

SoGa Ventures co-founder and managing partner Pocket Sun / Photo credit: SoGal Ventures

In 2022, the percentage of VC funding that went to women entrepreneurs was 1.9% out of a total of US$238 billion raised by US startups, according to PitchBook data. As market conditions deteriorated last year, investments into startups with Black and Latina founders at the helm also dropped more markedly compared to funding for businesses run by white male founders.

“People should pay attention to undervalued founders, undercapitalized geographies, and underserved problems – stop chasing the hot trends,” Pocket Sun, co-founder and managing partner at SoGal Ventures, tells Tech in Asia.

Vancouver-based Sun, who was born in China and studied in the US, is doing exactly that through SoGal Ventures, the pre-seed and seed stage venture fund she co-founded with Elizabeth Galbut in 2016.

According to Sun, 95% of portfolio firms from SoGal Fund I, which launched in 2017, have at least one female co-founder while 86% have women CEOs.

While attention around crypto and Web3 in the past year have incentivized investors in a very short-term, hype-driven way, she believes “it’s time to cool down.”

A sum of its parts
Active since: 2016
Founders: Pocket Sun and Elizabeth Galbut
Current fund size: SoGal Fund II (fundraising ongoing) plans to make 25 to 30 core investments at US$1 million to US$3 million each
Invests in: Digital healthcare, consumer tech, the future of work, and sustainability
Portfolio firms: Everlywell, Function of Beauty, August, and GuavaPass
Headquarters: New York
Areas covered: Mainly North America, with some investments in Asia Pacific
Other highlights: Also runs a global community of investors and entrepreneurs through the SoGal Foundation

Investing in diversity, minority teams, and healthtech 👩🏻‍⚕️🩺🏳️‍🌈

Over a third of SoGal Ventures’ investments are in the digital healthcare space, where “a lot of times, it’s women and minorities who have felt these pain points in the past,” Sun points out.

One of the firm’s most notable investments in this space is Everly Health, which provides at-home health testing kits and was reportedly valued at US$2.9 billion in 2021.

While SoGal Ventures has invested in women’s health and wellness since 2017, femtech remains a “hard” category to invest in.

Sun adds that part of the reason for this difficulty is regulatory hurdles: In the US, sexual wellness apps could get pulled from app stores or fail to get approval for ads placed on Instagram or Facebook because they are deemed a vice, making scaling and fundraising a challenge.

As it turns out, investing in minority and women founders also makes for good business.

Blurring lines between consumer and enterprise 👩🏻💻👦🏻

Dealing with a “collective depression” 🧠💭