Diversity Venture

EoY 2019 Diversity Report: 20 Percent Of Newly Funded Startups In 2019 Have A Female Founder   

We close out the decade with 20 percent of global startups raising their first funding round in 2019 having a female founder.

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The proportion of female co-founded companies has doubled since 2009 which stood at 10 percent.

In our very first report, published in early 2015 after we added gender to Crunchbase, we noted: “In 2009, 9.5% startups had at least one woman founder, but by 2014 that rate had almost doubled to 18%. At the same time, the absolute number of companies (along with the total number of startups) with a female founder more than quadrupled from 117 in 2009 to 555 in 2014.”

Back in 2009 there were far fewer startups, and a lot less funding.

In the five years since 2014, close to 10,000 startups with at least one female founder have raised funding. This signals a huge shift in our industry and our reporting on founders reflects that.

Along with the changed funding environment, many notable female-founded venture firms have been set up in the last 10 years, including many of which have contributed to our coverage on this issue.

The list includes Acrew, Backstage CapitalBBG Ventures, Canvas Ventures, Cowboy Ventures, Defy.vc, Define Ventures, Female Founders Fund, Fika Ventures, Forerunner Ventures, Future Ventures, Future Positive Capital, Illuminate Ventures, Jane VC, The Perkins Fund, Pear Ventures, Portfolia, Reach Capital, Spero Ventures, Third Kind Venture Capital, Ulu Ventures, UpWest, Yes VC, the more the recently founded Operator Collective and Moxxie Ventures among many more firms.

The year of 2019 broke records with 21 new female-founded unicorns reported by Crunchbase. In 2018 we reported on 15 new unicorns, with previous years all in the single digits.

The total number of newly funded startups with a female founder is one indicator of change, along with advancement of women in venture. How female founders fare when it comes to raising venture funding is another measure we explore.

Invested Dollars In Female-Founded Companies

In 2019, $26.7 billion was invested into companies with at least one female co-founder; just over $6 billion in female only; and $20.6 billion in female/male co-founded companies.

This is the second-largest funding amount invested in female founders in a single year. There was $44.8 billion invested in 2018, including one of  the single largest rounds to a female-founded firm with the Ant Financial deal.

Proportion Of Dollars Down YoY

Let’s look at these dollars in the context of overall investments in male- versus female-founded companies. The year 2019 closed with 3 percent going to female-founded and 10 percent to male/female co-founded companies making up 13 percent of all seed, venture and corporate venture dollars. Since 2016 the proportion to female only and male/female co-founded has not shifted from 13 percent overall — barring 2018 with Ant Financial, which single-handedly increased the proportion to female only founded.

Deal Counts Flat YoY

The proportion of deals in 2019 is slightly higher when compared with dollar volume. Female-only was at 6 percent and female/male co-founded companies was 13 percent, making up 19 percent of all funding rounds. Since 2016 deal count has gone up by 2 percent, and is flat year over year.

2019 By Funding Stage

Many founders seek to understand the numbers we just looked at through each funding stage. We break it down here for 2019 rounds.

Overall trends are that seed tends to be higher in count and amount, and at each stage moving through Series A, B and C+ rounds. Counts tend to be higher than amounts–an indicator that female founders raise less than their male counterparts. And female only founders raise less of a proportion of funding than male/female co-founded teams.

With seed as the first step in a startup  journey, these percentages are indicators for trends in future years for early- and late-stage rounds.

Investor Community Speaks

We spoke with investors who are seeking to impact these numbers and understand the challenges women face.

“When you’re a founder, the terms that are set are ultimately driven by your ability to negotiate,” said Jana Messerschmidt, founding member of #Angels.

She explained further:

“Certain founders may only get one term sheet, so that’s the deal they have to accept because they don’t have as much negotiation leverage. But other founders might go to Sand Hill Road and get six term sheets in a week; they’re going to drive the negotiation, they’re going to have lower dilution and higher valuations and they’re going to set the terms. That’s something we talked about a lot in our group. Do women have as many options when they go out raising? Are they able to command and demand that same sort of excitement about the companies that they’re building where they’re able to drive the negotiation process and set those terms?”

Susan Lyne, co-founder of BBG Ventures, who setup a firm specifically to invest in consumer tech startups with a female founder, is familiar with the issues female founders face.

As she explained:

“I think the issue is pretty simple. 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. Which by the way, I wholeheartedly support. And I think with initiatives like All Raise, you’re going to see more of that.”

Methodology: Notes On The Data

For this quarterly report, our analysis is based on announced funding to companies with founders associated. This is in contrast to our overall venture capital report where we use projected data in order to correct for data lags for the most recent quarter. Over time we fully expect more founders to be added to Crunchbase, as well as a reporting lag on funding which will be greater for the most recent year. For this report we include private company fundings from seed through to late-stage venture. We exclude private equity rounds.

Crunchbase’s dataset is constantly expanding, but there are gaps. A company may not have founders listed on its Crunchbase profile. Or Crunchbase might not have a gender listed for founders that are attached to the person’s Crunchbase profile. (Note: In addition to “male” and “female,” Crunchbase has over two dozen other gender tags.) Based on an analysis of current data for this report, more than 80 percent of dollars raised in the last five years are associated with companies that have founders.

Crunchbase, like all databases of private-market transactions, has a documented pattern of reporting delays. It can sometimes take weeks to months for some rounds to be announced publicly and subsequently get added to Crunchbase. This is especially the case for seed and early-stage deals, which are often raised by companies before the company launches a product, or otherwise gets much outside media coverage which surfaces information about the company’s funding history. As data is added to Crunchbase over time, some of the numbers in this report may shift slightly.

Illustration: Dom Guzman

First Funded Chart: JD Battles

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