Q2 2019 Diversity Report: Underwhelming Funding For Female Founders, We Ask VCs Why

Illustration of Black and Brown Women. [Dom Guzman]

The future of venture capital is not just women investing in more women, it’s also men stepping up and funding female founders. At least that’s what we hear from women on the ground who are running companies and raising funds.

“The future is men investing in women,” said Claire Tomkins, the CEO of Future Family, which focuses on in-vitro fertilization. She would know. Her company raised $10 million in October.

But a shift toward diversifying won’t happen without explicit intention, founders told us. VCs have to be committed to a dedicated strategy of investing in diverse founders to truly move the needle.

Unfortunately, it’s a future the investment class, which is made up of mostly men, is struggling to build — though there are bright spots from a macro point-of-view.

Bold statements about the future are one thing (and we certainly aren’t afraid to make those), but here at Crunchbase News, we’re going to use data as the foundation for our analysis.

Let’s get to it.

Balcony-level View: Pretty Dim

In the past three quarters, the percent of money raised by female-only founded startups has not broken past 3 percent. While Q2 2018 did break that mold, we take that data with a grain of salt. As is possible when correlating data, an outsized round warped the numbers a bit. In this case it was a $14 billion Series C round from ANT Financial, founded by Peng Lei.

Street-level View: Progress Being Made

Efforts are being made to advance the ball in terms of supporting diverse founders.

Alyson DeNardo, M Ventures’ first and currently only female partner, said only 20 percent of its portfolio companies from its first fund are companies with at least one female founder. Its second fund, when DeNardo joined the team, invested 28 percent.

To help build “the next generation of tech companies,” DeNardo said she specifically offices out of a female-focused coworking space and social club. One recent Friday afternoon she realized all her calls or meetings were with female founders or investors.

“I took a deep breath and breathed in the glory that was that moment,” she said.

Kapor Capital’s Ulili Onovakpuri said the San Francisco firm is 50 percent women, which has helped to “ensure that we invest in a diverse group of entrepreneurs.” About 38 percent of its investments have a founder who identifies as a woman.

Charles Hudson of Precursor Ventures said his only strategy to invest in more women is having a diverse team. Two people in his three-people funding team are black females.

Of Precursor’s 176 investments, 43 percent of those companies have at least one woman on the founding team. He hasn’t seen any obstacles in building a gender and racially balanced portfolio because his firm puts its mission at the forefront.

“I think most of what we try to do is to signal to the market that we are interested in building a diverse portfolio,” he said.

Eniac Ventures has no female partners, although half of its investments this year have been in female-founded companies.

According to the firm’s founding partner Nihal Mehta, Eniac has helped female-founded funds get off the ground—by connecting its own limited partners with new funds.

However, navigated funds specifically earmarked for women or other minority groups can be tricky.

While all money is good, one founder we spoke to is concerned that “it’s creating the potential scenario where we don’t need to invest in women, non-binary people and men of color from main funds because we’re doing this from our diversity funds,” said Natalia Oberti Noguera, founder of Pipeline Angels.

For example, Female Founders Fund launched with a $27 million fund in 2018. That same year, in two days, three VC firms announced $4 billion for six new funds. None of those funds explicitly focused on diversity.

The Seeds Of Growth

It’s not all doom and gloom however for female-only and gender diverse teams—there has been moderate growth for this efforts.

In 2014, global dollar volume for startups with a solo female founder or at least one female founder was 10 percent. So far this year (despite more deals and available dollars than ever before) the share of cash going to those same groups is at 14 percent. Similarly moderate progress can also be seen in global deal counts.

“That data we’re seeing [is] the results of seeds sown years ago,” said Suuchi Ramesh, founder of Suuchi, a startup focused on modernizing supply chains for fashion brands and retailers.

“And now, we’re seeing new seeds being sown, and I’m confident we’ll see an exponential impact to that,” she said.

If Ramesh is correct, we could see an even further uptick in investment to female-founded startups across all stages in the long run. And despite discouraging statistics concerning gender-derived fundraising gaps, Ramesh recently raised a $8 million Series A from Edison Venture Partners. Her experience may be contrary to the norm, however.

“Companies headed by women or under-represented founders of color find it much more difficult to raise follow-on rounds of funding with revenue and growth metrics that are as good or better than their white male counterparts,” said Kapor Capital’s Onovakpuri.

Katie Rosen Kitchen, founder of FabFitFun tries to intentionally work with business partners that aren’t “older white men.” She advises other companies to do the same.

Her company was the first female-founded unicorn of 2019, according to Crunchbase data. When it comes to applying that same perspective to investors in her company, Kitchen has fewer options since VCs still skew male.

“On the one hand, it’s really important to brands to just find the best fit of [someone] who understands the company, no matter what the gender is,” she told Crunchbase News in June. “But naturally, there’s a little bit of tension here because there are [fewer] female VCs than male VCs.”

As the venture class becomes more diverse, the signals they look for in investments may also change.

Andrea Walne entered venture capital after working as a director at Carta, which helps startups manage equity for employees. As such, she looks for red flags in potential investment opportunities, especially when evaluating at a team holistically.

“I ask why is she just the head of marketing, and not the CMO? Or, why did this company lose a female co-founder early on?” Walne said.

If those questions cause executives to stumble, Walne views it as a red flag and a potential deal breaker.

Looking Ahead

As another quarter closes, we’re reminded that the world of venture capital, and how it flows into female-founded companies is nuanced. Where there’s an unprecedented growth of female-founded unicorns, there are younger female-founded startups struggling to feel that same momentum. And where there are new female venture capitalists in the mix, males still own a majority of stakes in the decision-making process.

The female venture report is a collaborative effort between multiple team members: Data analysis by Gené Teare; reporting and interviews by Natasha Mascarenhas; editorial support: Jenna D’Illard, Alex Wilhelm, and Holden Page; and featured image by Dom Guzman.


The charts and information in this report are based on reported data in Crunchbase. In other words, it’s based on publicly disclosed rounds included in Crunchbase dataset.

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, 84 percent of dollars raised, and 79 percent of deal count in the last five and a half years are connected to companies with founders.

Crunchbase, like all databases of private-market transactions, has a documented pattern of reporting delays. It can sometimes take between 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.

Seed includes angel, pre-seed, seed, equity crowdfunding, and venture series unknown below $1 million. Venture rounds includes early and late stage venture, and corporate venture. We exclude private equity rounds from this report.

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

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