While venture capital funding reached all-time highs in 2021, companies started by women received just 2% of those funds – the smallest share since 2016.
Overall, 2021 was an exceptionally strong year for VC investment across the U.S., eclipsing previous records and topping nearly $330 billion. Of that, a record-breaking $6.4 billion went to female-only founded startups, according to data by research firm PitchBook.
That’s 83% higher than the amount raised by female-founded companies in 2020, but still a “disproportionate blow” to companies founded solely by women, the report states. It’s the second year in a row the percentage of women’s VC funding shrank but because the total funding levels in 2021 hit record highs, the overall dollar value of the funding to female founders rose.
When women teamed up with male co-founders, they fared better when it came to raising capital in 2021, capturing 15.6% of the total VC funding — the highest amount since 2017.
The pandemic took a devastating toll on female founders- much more so than their male counterparts when it came to venture capital funding, according to the All In: Women in the VC Ecosystem report. The report, published by PitchBook in collaboration with J.P. Morgan and Beyond the Billion, found that while female entrepreneurship recovered in 2021, the pandemic “dented years of progress.”
“Since launching our Women in the VC Ecosystem series in 2019, we’ve seen meaningful growth in the number of women in decision-making roles at VC firms, a positive institutional-level trend that should bode well for female founders,” said Nizar Tarhuni, senior director of PitchBook’s Institutional Research Group. “However, the measurable Covid-19 setbacks for female-founded companies, despite their consistent performance and resilience, illustrate why we must be diligent about pushing for gender equity within the VC ecosystem.”
Dealmaking in 2020 was sporadic for everyone, but all-female-founded companies experienced a 28% decline while all-male-founded ones only saw a 5% decline between March and June of that year, the report states.
One area of massive growth in funding for female-founded companies came from female angel investors, which has gained momentum since the #MeToo movement began in 2018, the report states.
“Since the #MeToo movement, the female angel scene has come close to doubling, with almost 1,000 active angels in the market today,” the report states. “In 2017, before the movement began, about 20% of female angel investments went to female founders. Today, almost a third of them do and the ratio continues to grow.”
Sarah Chen, co-founder and managing partner of Beyond the Billion, a global consortium of VC funds and limited partner investors that have pledged to invest more than $1 billion to women-founded companies, said it’s encouraging to see the “growing number of female check-writers leveraging their influence and capital.”
“While this trend has been noted in the U.S., we’re similarly seeing this across the glove with 80% of our fund managers being women, BIPOC (Black, Indigenous and People of Color) or both; and a growing number of male champions that recognize that investing in women is just good business,” Chen said. “Savvy asset allocators know that diversity has to be one of their pillars of growth and are using their capital transformatively.”
