Female Founders Raised More V.C. Funding In 2021, But It’s Complicated

(L-R) Actress Rose Byrne, Editor In Chief of More Magazine Lesley Jane Seymourand, actress … [+] Quvenzhane Wallis and Miss Universe 2013 Gabriela Isler speak on stage during the United Nations 2014 Women\’s Entrepreneurship Day (Photo by Noam Galai/WireImage)


The good news is that female-founded companies are raising more money from venture capitalists than ever, but it’s relative. When you’re starting from only 2.3% in 2020 the only direction to go is up. 

Covid hit female-founded companies harder than male-founded ones when it comes to v.c. funding.  The new All Raise report from Pitchbook found that in 2020, “female founders received a smaller slice.”

Female founders raising more, gap widens Protocol.com screenshot

Protocol.com screenshot

The report – produced in collaboration with Beyond the Billion, a firm focused on attracting more venture capital into female-founded companies, and sponsored by J.P. Morgan – states that, “Even as the recovery started to take shape between the second and third quarters, female-founded companies still lagged the overall VC market. Between Q2 and Q3, female-founded companies saw slightly fewer investments, while deal count across the industry as a whole rose 6.2%.” What’s worse, “the difference in deal value was even starker” as “female-founded companies took in 8.1% fewer dollars, while the broader market saw 28.2% more.”

Having women on the panel deciding who gets the deal seemed to matter a little, according to Crunchbase. “We analyzed U.S. female-founded venture firms and found 28 percent of deal counts from 2016 to October 2021 were in startups with at least one female founder. That proportion dropped to 22 percent of deals for male-only founded U.S. venture firms.” They added that 64% of venture capital firms with funds over $25 million have no female partners at all.

It’s not just about bias. Your long-term goals may not be aligned.

Jenny Kassan

Jenny Kassan

Jenny Kassan, an attorney who founded Jenny Kassan Consulting to help founders raise capital from “normal” investors, said on my Electric Ladies podcast recently that, founders, especially female founders, forget that that they have more options than just v.c’s, angel investors, and friends and family.

She said v.c. bias is an issue, but it’s also about the goals of venture capitalists versus those of women entrepreneurs. “There\’s definitely bias in the venture industry, but there\’s some other things going on there too, that I think we need to really be aware of,” Kassan said.

“Venture capitalists have a very particular way that they like to invest and that they like to make money, “ Kassan explained. “They like to invest in businesses that are on a very high growth path and have a plan for some kind of big what we call a liquidity event within ideally five to seven years. So that means you start your company, you put everything into growth. That\’s your number one goal is growth, growth, growth. And your main mission is to be an attractive acquisition target to a larger company so that your company can get bought in five to seven years by a larger company.”

“Women entrepreneurs,” on the other hand, Kassan has observed, “are more likely to start businesses that are not on that path than men…We prefer to have businesses that are growing in a more sustainable steady way. And we prefer to maximize the benefits to all stakeholders and not just focus on that one goal of the big exit at any cost and the high growth at any cost. And so…a lot of times it\’s just that the businesses we\’re growing are not a good fit for venture funding.” She put most angel investors in that bucket too.

“So, if you go and seek money from those kinds of investors and you happen to be anyone other than a white man who maybe has an engineering degree from Stanford or MIT,” Kassan warned, “chances are, you will face discrimination of all kinds and even harassment.”

You can raise funds from “normal” people, especially if you’re focused on a mission

You have other options though. Kassan said that female and other under-represented founders, especially those with a mission, can be well-positioned to raise funds from people in their world who do not consider themselves “investors,” people they might not have predicted would do so.

“I personally believe that it\’s much easier to raise money for a highly mission driven business because…the majority of investors want to do good with their money, “ Kassan said. “So, if you can give them an opportunity to do that, they will be more excited,” and you will be able to grow your company the way you want to, “in a way that lets you stay true to what\’s important to you, your mission, your goals, how you want to live your life,” Kassan said.

“We just need to be more open-minded about who our potential investors are,” she added.

For tips on strategies to reach “hidden” investors, click here. To listen to Joan’s interview with Jenny Kassan, click here.