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Women Founders Again Raise Small Share of Venture Funds

Man, woman shaking hands


21 Jan. 2020. In 2019, only one in five new companies worldwide receiving venture financing was founded or co-founded by a woman, about the same percentage as in 2018. These data are part of the 2019 end-of-year diversity report by Crunchbase, an entrepreneurship and venture capital research company in San Francisco.

The report, compiled by Crunchbase research leader Gené Teare from transactions collected in Crunchbase data files, shows 20 percent of start-up companies receiving venture capital investments in their first venture finance rounds in 2019 had one or more women as founders, the same percentage as in 2018. Since Crunchbase began tracking investments in women-owned start-ups in 2009, however, both the overall number of women entrepreneurs funded has grown steadily, with nearly 10,000 companies since 2014. And the percentage of annual investments in woman-founded companies doubled from 10 to 20 percent since 2009.

Start-ups worldwide founded by one or more women raised $26.7 billion in 2019, down sharply from the $44.8 billion raised in 2018. Also in 2019, only $6.1 billion or 23 percent of that $26.7 billion was raised by companies started only by women. In 2018, nearly half (47%) of the $44.8 billion raised went to start-ups with only women as founders. See chart below.

Of the total venture funds raised worldwide, 13 percent were raised by women-founded enterprises, the same percentage as 2016 and 2017, but down from 17 percent in 2018. Likewise, the percentage of investment deals remained at 19 percent for companies with one or more women as founders, the same percentage as 2018, and barely exceeding the 17 percent recorded in 2015 and 2016.

Women-owned start-ups are more likely to collect venture funding in their companies’ earlier stages than later on, according to the Crunchbase data. Some 21 percent of investment dollars raised in seed rounds in 2019, those gained at the very beginning of a new company, went to enterprises with one or more women founders, while between 10 and 13 percent of later funding rounds went to women-founded companies. The same pattern emerges in the number of venture deals in 2019, where women-owned companies accounted for 22 percent of seed round transactions, with the percentage decreasing to 13 to 17 percent of later venture rounds.

One category of companies where the presence of women founders increased sharply in 2019 is unicorns, defined as start-up enterprises with a market capitalization exceeding $1 billion. Last year, 21 start-ups with one or more women founders reached unicorn status, up from 15 in 2018. Between 2013 and 2017, the number of women-founded unicorns fluctuated between four and nine.

One sign that the venture funding environment for women-founded start-ups may improve is the growing number of venture investment companies started by women. While the report does not quote a total number, Teare identifies 25 of these enterprises by name. Susan Lyne, co-founder of BBG Ventures in New York, one of those women-founded venture capital companies, tells Teare …

This is an industry that has always run on relationship networks. Someone you know and respect makes a warm introduction to a great founder and you agree to hear their pitch. But if women are not part of your network, you’re just at a big disadvantage. You’re going to miss a lot of great companies. I think investors are finally starting to wake up to this. More and more VC firms are adding a female partner, partly because there’s been a lot of noise about it, but mostly out of self interest.

Chart: venture funding for women-founded companies

Click on image for full-size view. (Crunchbase)

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