According to PitchBook data, $330 billion in venture capital was deployed in 2021, with only 2% of that amount going to companies created solely by women, and 15.6 percent going to teams with both men and women on their founding teams.
In my opinion, the correct figure is around 18%, not 2%, because we need to account for deals with mixed-gender founding teams. These three figures should be published since 18% of $330 billion amounts to $59 billion, or 25% of all venture transactions (e.g., deal count).
Women-founded companies’ financing figures should not be excluded because of founding teams that include both men and women. As a result, all of the fundraising success and the leadership work that underpins it are attributed to the founders.
Beyond the exclusion of companies with mixed-gender founding teams that had huge success in 2021—think Alloy (which became a unicorn), Cityblock Health (which raised $600 million), and Nubank (which closed the year with a record-breaking IPO)—the correct statistic reflects a dramatic shift in gender disparity.
Women-founded businesses receive one out of every 50 venture dollars, according to 2%, while 18% believe it is closer to one out of every five venture dollars.Both indicate that there is more work to be done on the issue, but they illustrate distinct beginning positions and, as a result, the distance that must be crossed.
We still have work to do, but we’re not pushing a boulder up a hill-we’ve made it halfway.
If our ultimate objective is to understand the current state of opportunity and its expansion over time, we need to, in the words of John Doerr, measure what matters: representation in early-stage financing.
On an annual cohort basis, we should be tracking the number of first institutional round venture agreements, (ii) the demographics of the founders of those companies, and (iii) the funder composition. The rest is just background noise.
Women founders (defined here to include mixed-gender teams) received 24 percent of first-financing venture agreements that revealed founder identities in 2021, according to the most recent PitchBook-NVCA data.(Of the 4,375 deals, 3,659 revealed the identities of the founders, and 895 were led by women or individuals of both genders.)
According to this perspective, one out of every four first-financing agreements goes to a company with a female founder, which is a far cry from the outrage-inducing 2% share circulating in the sector. We’re still here.
To put the figure in context, since 2017, women-founded businesses have accounted for about 24% of all first-financing deals with mixed-gender teams. From 2012 to 2016, this figure was approximately 20%, and in the mid-to late-2010s, it was in the mid-teens. This means that first-financing transactions to female-founded businesses have expanded at a quicker rate than overall first-financing dealmaking.
The numbers for female founders and total first-financing growth are 1.6x compared to 1.4x from 2016 to 2021, 1.1x compared to 1.1x from 2011 to 2016, and 3.8x compared to 2.2x from 2006 to 2011.
On a five-year compounding annual growth rate (CAGR) basis, the numbers for women founders and male founders are 6.2 percent and 2.5 percent, respectively.
Given the recent significant increase in emerging fund managers, particularly those with women-founder investment mandates, female venture investors, and commitments from storied firms to increase support for underrepresented founders, the slowing growth in first-financing venture deal count over the last 15 years is perhaps most surprising.
This puts into doubt the effectiveness of reporting and lobbying efforts.
Better reporting from funders is required.
Based on the backgrounds of their founders, how did all of the top funds fare in 2021? Unclear. How do emerging fund managers compare to well-known firms? Unclear
If I am a newly rich individual interested in becoming a limited partner (LP) in a fund with the finest first-money-in track record for women founders, black founders, immigrant founders, or other sectors of entrepreneurship, what should I do?
Is it true that more first-financing arrangements in women-founded businesses are led by female investors? Unclear. What percentage of emerging fund managers are raising and investing in pre-seed or seed versus Series A and B, which is the opportunity bottleneck? Unclear
Coverage falls short of meaningful accountability without funder-side reporting that matches the rigour of founder-side analysis. Separate those who are leading the charge from those who are trailing, as well as first-check writers—those who are actually sponsoring opportunities—from those who are supporting women in other ways. Benchmarking funds and investors by deal count allows all ecosystem members to interact more effectively based on their priorities, so it’s a worthwhile task.
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