Female founders are consistently outperforming their male peers, yet they still struggle to get funding.
Time and time again, research has proved that female founders are a great bet, yet they still have to overcome countless hurdles. The staggeringly low % of VC funding that goes to female founders is a perfect example of how the cards are stacked against women entrepreneurs.
In 2019, before the pandemic, female founders raised 2.8% of VC funding yet after the pandemic there has been a substantial drop. The number of VC funding that goes to women entrepreneurs fell to 2.3%. As PitchBook found, this drop can’t be attributed to a drop in funding all together: startups as a whole raised 13% more in 2020 than in 2019.
Melissa Withers, co-founder of RevUp Capital, responded to the fact that VC funding for female founders dropped to a three-year low by acknowledging the long road ahead to equality: “When it comes to unraveling systemic racial and gender bias in the investment community, data affirms that we are only at the beginning of a very long and difficult fight.”
Withers correctly highlighted the fact that Black and Brown women founders lie at an intersection of disenfranchised identities, and have to overcome more challenges in order to succeed. As the talented Kathryn Finney said about her fundraising experience when we interviewed her: “I was met with varying degrees of racial and sexual biases towards me — one prominent investor even told me that I had the idea, but that he just doesn’t do Black women”
So, why are female founders a great investment?
Companies with female founders perform 63% better than those of male peers. (Data collected by First Round Capital)
Women-led teams generate 35% higher return on investment than all-male teams. (Data collected by E.M. Kauffman Foundation)
Startups founded or cofounded by women garner less in investments but generate more revenue. A study of 350 companies revealed that for every $1 raised, female-run startups generated 78¢ in revenue, whereas male-run startups generated 31¢. (Data collected by MassChallenge & BCG Analysis)
Research found that women score higher than men in most leadership skills. (Data collected by Harvard Business Review in 2019)
Founder teams with women have a higher internal rate of return (IRR): 112% versus 48%. (Data collected by KPMG FinTech Focus)
Female founder teams are more likely to exit: 12% of the businesses with at least one female founder have successfully exited (versus 9% of all male teams). (Data collected by the British Business Bank in Partnership with Diversity VC and the BVCA)