Venture Capital Firms Favour Mixed-Gender Teams Over All-Women Founded Startups
According to the latest data from PitchBook, U.S. startups with mixed-gender founding teams raised a staggering $24.1 billion in the first half of 2023. This breakdown includes $17.2 billion in Q1 and $6.9 billion in Q2, marking a significant milestone for these companies.
While this number is impressive, it’s worth noting that funding to mixed-gender teams is expected to reach its second-highest total ever this year. In contrast, startups with all-women founding teams are struggling to raise money, with only $1.4 billion raised in H1 2023.
The Rise of Mixed-Gender Teams
Mixed-gender teams have picked up 28.1% of capital raised in H1 2023, a significant increase from the 16.9% they secured in H1 2022. This trend is expected to continue throughout the year, with PitchBook predicting that the amount of capital allocated to mixed-gender teams will overtake last year’s sum.
The Struggle of All-Women Founded Startups
In contrast, startups with all-women founding teams are facing a tougher time raising funds. They have secured only $1.4 billion in H1 2023, which is lower than the amounts raised in previous years. The last time companies with all-women founders raised such a low amount was in 2017.
The Ratio of Capital Raised by All-Women Founded Startups
Despite the overall increase in funding for mixed-gender teams, the ratio of capital raised by all-women founded startups remains relatively stable. They have secured 1.6% of the capital allocated this H1, which is only a tad lower than the 1.9% they secured in H1 2022.
The Impact of Gender Bias
Gender bias plays a significant role in determining the amount of funding that women-founded startups receive. According to Harvard Business Review, VCs tend to ask women "prevention" questions on what could go wrong, while men typically get asked "promotion" questions regarding what could go right.
Elina Valeeva, co-founder of health app Essence, shared her experience with gender bias in venture capital. She stated that as a woman, she faces more scrutiny and skepticism from investors than her male counterparts.
The Importance of Diversifying Venture Capital Teams
Diversifying venture capital teams can help address the issue of gender bias. By having more women on investment teams, VCs are better equipped to understand the needs and challenges faced by female-founded startups.
Conclusion
While mixed-gender founding teams have raised a significant amount of funding in H1 2023, it’s essential for venture capital firms to recognize the importance of supporting all-women founded startups. By promoting diversity and inclusivity within their investment teams, VCs can create a more level playing field for female entrepreneurs.
Recommendations
- Increase representation of women on investment teams: Venture capital firms should strive to have more women on their investment teams to better understand the needs and challenges faced by female-founded startups.
- Provide more funding opportunities for all-women founded startups: Venture capital firms should prioritize providing more funding opportunities for all-women founded startups to help bridge the gap in funding between mixed-gender teams and all-women founded startups.
- Promote diversity and inclusivity within the venture capital industry: The venture capital industry as a whole should promote diversity and inclusivity by creating programs that support underrepresented groups, such as women and minority founders.
By implementing these recommendations, we can work towards creating a more equitable venture capital ecosystem where all entrepreneurs have an equal chance of success.