Female Founders Got 2 percent of All Venture Capital Dollars across the US in 2021—the Lowest since 2016 (1.8 percent)
2 min read · March 24, 2022
Mimi Aboubaker, Techcrunch
Highlights: US startups 2021 venture capital funding
The Pitchbook data shows that across the US startups in 2021, $330B in venture capital was deployed, out of which only 2 percent ($6.4B) went to companies founded only by women and 15.6 percent (to teams with both women and men on their founding teams.
If we consider deals with mixed-gender founding and female-only led teams, we see about 18 percent (i.e., $59.40B) or roughly 25 percent of the total deal counts (venture transactions) in VC-backed startups in the US throughout the year.
There is a gap in reporting data on how the acquired capital is distributed; thus, better reporting standards are needed. The current number doesn't help us understand "diversity" among founders and funders. For example, Recent research spotlights female entrepreneurs' ongoing challenges in accessing funding to scale their businesses and suggests the lack of female representation among investors as a contributory cause. So is it true that women investors are leading more first-financing deals in women-founded companies? Unclear as we do not have the data to support which tells us how many percentage of women founders funded women-led startups, in which year, and how it compares geographically or as per ethnicity.
The aggregated deal value data tells us nothing about the state of access to capital for underrepresented founders or gender disparities in capital allocations today. Since annual deal value is a lagging indicator skewed by late-stage financing into companies formed five to 10 years ago, it suffers from survivorship bias, as funding after the first financing round is contingent on performance. The aggregated deal value will mostly grow each consecutive year as the company seeks later-stage funding, assuming the company has a positive return on investment over the years. This leads to the skewing of data if not grouped by funding rounds, deal counts, and demographics of the founders.
Takeaway
To comprehend the current state of venture capital, the data components that we must track should be:
The number of first institutional round venture deals,
The demographics of those companies' founders and the funders' composition on an annual cohort basis.
References
Aboubaker, M. (2022, March 24). Data obscures positive trends in VC dollars reaching women-founded startups. TechCrunch.