The venture capital industry as we know it is broken. At least for women, that is. In terms of funding to women founders, 2020 was among the worst years on record. On a global level, only 9% of all funds deployed to technology startups went to founding teams that included at least one woman. Solo woman founders and all-women teams raised just 2% of all VC dollars, Crunchbase data showed.
Shockingly, this number is actually less than it was when we first started counting a decade ago, well before many high-profile diversity initiatives launched with the goal of fixing this very problem.
“This funding gap isn’t just a moral crisis — it’s an economic one. The lack of investment into women-founded startups is a missed opportunity worth trillions of dollars”
That’s because of overwhelming evidence that startups founded by women outperform startups founded by men: They generate more revenue, earn higher profits and exit faster at higher valuations. And they do all this while raising way less money. What we’re doing isn’t working. Through research for my next book on women founders and funders, I kept asking myself the same question: When it comes to fixing the funding gap for women founders, what’s the one thing we can do that will make everything else easier or unnecessary? I now believe that our best bet for long-term change is to focus our efforts on increasing the number of women investing partners who can write large seed checks. Here’s why.
1. Women investors are up to 3x more likely to fund women founders
Recently, one of the top VCs in the world told me how challenging it is to diversify his senior team. He expressed it as an accepted fact and a widespread belief. This is a common trope in Silicon Valley: Everyone wants gender diversity, but it’s so hard to find all the senior women! In the venture capital industry, who you hire at the senior level is who you hang out with. And who you hire at the senior level determines who your fund will back.