Funding for Women-led Startups Decreased in 2020
3 min read · Jan 2025
Bittner and Lau (2021)
All the arguments in favor of supporting women-led businesses have not been enough to turn the tide among investors.
Summary
Despite recent progress, venture capital (VC) funding for women-led startups has dramatically decreased. This article argues that various factors such as investor bias, male-dominated ecosystems, and the underrepresentation of women in the VC industry contribute to the sharp decline.
Method
This article, published on February 25, 2021, employs a mixed-methods approach to examine the funding landscape for women-led startups and the patterns in women-led ventures. By leveraging quantitative data from Crunchbase and qualitative insights from the practitioners and researchers from McKinsey and Boston Consulting Group, the authors highlight the significant drop in funding for women-led startups compared to historical trends. The article explores underlying factors that contribute to this disparity, including the dominance of male-dominated VC networks and the impact of gender bias on investment decisions.
Key Findings
There was a significant drop in VC funding for women-led startups in 2020.
The percentage of VC funding for women-led startups decreased from 2.8% in 2019 to 2.3% in 2020.
The 2.8% in 2019 was a historical high.
Women are underrepresented in the VC firms.
About 12% of U.S. VC firms' decision-makers are women.
Most firms still do not have a single female partner.
Only 2.4% of founding partners are women.
Female entrepreneurs tend to hire more women, making funding disparities more consequential.
Startups with a female founder employ 2.5 times more women.
Companies led by both a female founder and a female executive employ 6 times more women.
The decline in funding for women-led startups limits opportunities for female entrepreneurs and reduces job creation for women.
Takeaways
This article highlights the significant challenges faced by women entrepreneurs, particularly the dramatic decline in VC funding for women-led startups during the pandemic. Despite evidence that women founders can deliver higher returns and create jobs, they face barriers in securing investment, especially in the male-dominated VC ecosystem, which tends to overlook the potential of women-led startups.
This gender disparity in venture funding is a global issue, affecting women founders across North America, Europe, and emerging markets. In the U.S., the share of VC funding going to female-only founded companies has remained stubbornly low, fluctuating between 2% and 3% since 2015 and declining slightly in recent years—from 2.1% in 2022 to just 1.9% in 2024. Overcoming biases within the investment industry will require a concerted and long-term effort. Increasing the number of women in decision-making roles, from junior positions to senior leadership, is crucial. Additionally, raising awareness about the challenges faced by women entrepreneurs and the potential returns of investing in women-led businesses is essential to driving systemic change.
References
Bittner, Ashley, and Brigette Lau. 2021. “Women-led startups received just 2.3% of VC funding in 2020.” Harvard Business Review. https://hbr.org/2021/02/women-led-startups-received-just-2-3-of-vc-funding-in-2020.
About WIN-VC Canada:
New Power Labs is the research lead of the Women and Nonbinary (W) Impact (I) Network (N) for Venture Capital (VC), a national collaborative of organizations working to provide services, programming, events, and dedicated resources to women and non-binary entrepreneurs and gender lens investors across Canada who are working towards becoming investment ready and increasing the pool of investors driven to invest in these ventures.
This research is part of WIN-VC Canada, supported by the Government of Canada. WIN-VC acknowledges the support of Innovation, Science and Economic Development (ISED). ISED has awarded funding for WIN-VC that will make the venture capital environment more inclusive for women by transforming traditional investment processes, processes and knowledge into respectful and meaningful approaches that value equity and impact with a focus on diverse women and non-binary entrepreneurs and SMEs including Black communities, Indigenous peoples, racialized populations, persons with a disability, 2SLGBTQ2+ and new Canadians.
