Search

Gender Gap Still Persists in Venture Capital in 2021


2021 has been an exceptional year for female-founded startups. Fitness startup ClassPass got acquired by Mindbody, fashion company Rent the Runway filed for an initial public offering (the first company with a female Founder/CEO, COO, and CFO to go public!), and womenswear brand Spanx sold a majority stake to Blackstone. Female founders in the US have raised over $25 billion in the first half of 2021, more than the total amount women founders have raised in any prior year.


Yet, despite the triumphs of these women-led startups in receiving funding and media attention, there is still a huge gender gap in venture capital funding. In 2020, only 2.3% of all VC funding went to startups with all-female founders. Comparatively, 11.7% of funding went to mixed-gender founding teams, meaning that 86% of funding went to all-male co-founders. Additionally, even though female founders have raised more capital than ever in 2021, they received a lower proportion of overall VC funding than in the past five years.


In short, the venture capital industry is a challenging, hostile environment for many women founders, and in spite of the successes that some female-founded startups have experienced, most are still struggling to get venture funding that is given disproportionately to men.


Why are female-founded startups still struggling to receive funding?

Gender inequality is still a major issue within venture capital, in terms of both representation and funding. Despite the conversations that many venture capitalists have been having in the past few years about tackling the issue, little progress has been made and discrimination against women still exists in various ways:


1. Women are more likely to be subject to first-impression bias

When pitching a startup to potential investors, a first impression can determine the outcome of the meeting. However, a study conducted by Dana Kanze at Columbia University found that female founders often face much more first-impression bias and scrutiny than male founders. While investors tended to ask male founders about financial rewards, questions posed to female founders focused on financial risks instead.


Additionally, societal expectations for women to be kind and accommodating play a role in creating first impressions. In an activity such as pitching where there is little room for social niceties, straightforwardness from women can leave a negative first impression on investors with implicit bias.


2. Women often struggle to raise capital

Aside from discrimination from investors, women also often face other roadblocks to getting VC funding. According to a SCORE report, female founders typically ask for outside funding less often than men, and when they do ask for it, they receive less than men. Additionally, Kanze’s study found that for each risk-related question an investor asked to a female founder, they received on average $3.8 million less in funds.


3. Women often have a harder time finding mentors

In addition to facing obstacles in pitching and raising capital, women founders are twice as likely as men to lack mentors and support systems. Founding a startup can be a laborious and grueling process, and even more so without a support system.


Connecting with mentors of either gender can bring about long-lasting benefits. Here at LevelUp, we recognize that mentorship can go a long way in helping women along with their entrepreneurial journeys.


What does the future look like for women in venture capital?

In spite of the attention that female founders have gotten in recent years, the landscape looks grim for women in venture capital. There’s still a long way to go to achieve gender equality in the industry, as well as in the broader field of technology as a whole.


However, there are currently efforts specifically focused on supporting female founders and funneling capital towards them. For example, The Fund, a venture capital firm composed of a community of founders and operators, is creating a new women-focused angel investment fund called The Fund XX. Through direct, focused action to empower female founders, the venture capital landscape can permanently change for the better.



Works Cited

29 views0 comments

Recent Posts

See All