Changes In VC and Startups Take Time
Starting and investing in startup companies is a long lead time business. It takes on average seven to ten years for the seed and early stage investments we make to turn into something.
So looking at data across the entire VC landscape can be confusing. Important trends can be lost in the noise.
Look at these two charts from the All Raise and Pitchbook analysis of the funding of female founders:
The first one tells a troubling story. Female founders are getting a tiny amount of the supply of venture capital and the percentages are not changing much.
The second one tells a promising story. The percentage of teams getting funded that are all male founded is declining and the percentage of teams that have women founders on them, or are all women founders, is rising.
The first chart is dominated by late stage companies (think companies that are 5-10 years old) and the second chart is dominated by earlier stage companies.
Let’s look at this data in five or ten years.
I think we will see a different story.
I don’t have the exact data on me and it would take more time than I have right now to calculate it, but my guess is that over the last four years, about thirty to fifty percent of the teams we have funded have had at least one woman founder on them.
The times are changing in venture, thanks to the hard work by a number of women founders, women angels (like The Gotham Gal), venture capitalists, and some men too, and it is having a big impact. We just can’t see it in the aggregate funding numbers yet.
It’s not just the right thing to do… it’s also great for business.
30-50% is a big step and I bet a huge change from the years prior.Good on you for doing this. Good on you for knowing that it is the smart business and social and diversity goal all rolled into one.
It would be good to look at the total number of female-led startups vs. those that get series A funding vs. male-led startups who get series A. That’s probably a better report card on biases within venture.
Northern Saskatchewan farmers are biased against planting and growing corn.However, with the shift in the climate, they may not be in 50 years. Any idea why?
I’d love to see a longitudinal study on female v male founded companies that receive “fairly equal sums” of venture capital. I’m going to posit a hypothesis that the female led companies are far more capital efficient.
Who makes for a better return, female or male?
In reality LPs and funds both want good risk-adjusted returns. The question is whether allocating larger volumes of capital to women is going to be financially justified as these investments close out. Maybe women were unjustifiably denied access to capital or maybe the PC push is the pendulum swing in the opposite direction. Data rules the day.
Has founder team definitoon, or size, changed over the time period observed? That may add some nuance to the interpretation if so. Also, this would have been way better as a line chart IMHO
Hi Fred, do you have any data on the total number of companies looking for VC money split up by with/without female founders over time? I’m sure you can see where I’m going with this… just want to break down the issue to see whether it’s a total numbers game vs. female founders are turned away due to some bias of the VC firm. Main reason I ask is because over 95% of the companies that pitch to us do not have a female founder, and we don’t (yet) specifically look for some certain characteristic of founder teams.
I see something different. These graphs reflect more money going into less deals. Per the 2nd graph, the number of female involved startups receiving money peaked in 2014 although the proportion of female involved startups relative to all men increased since 2014.What types of VC funds are funding these startups? Are established funds on fund X (variable, not ten) driving investments in female involved startups or are first time fund managers leading the way? This will be a better barometer as to the future of female involved/led startups gaining more access to capital.On an important and related note, Brad Feld shared an excellent Ted Talk on a big difference in VC / Investor behavior during company interviews that resulted in differences in funding. I’ll share the link to his blog post to give him proper credit.https://feld.com/archives/2…
Yup. I don’t ever see it being 50/50. Wrong measurement anyway because people make choices and economic conditions change over time. You made a different decision in 2008-09 than you might today. The point is people are aware and there is opportunity.I’d encourage everyone to become customers of HolbergFinancial.com. He’s doing diversity right and it would be cool if you could support him.Full disclosure I am on his board and we are the lead investors
It would be massively helpful for the industry to venture a guess as to what an appropriate ratio would be (i.e. success metric). Currently, it’s not enough.Or is VC funding even an important industry to look at since most businesses start, grow, and succeed outside of it?
I think VC funding is necessary for a lot of startups. I wonder if angels fund more females than funds. Be cool to see the data.
What percentage of all female founders fail to get funded? What percentage of all male founders fail to get funded? Does that data exist i wonder.
I see things a little differently in these graphs. The second graph shows that female involved startups receiving funding peaked in 2014 but the proportion of them being funded increased since then. The first graph reflects the general trend that fewer funds are pouring more money into less deals.Who are the VC’s funding these female involved/lead companies? Is there information that details that the VCs funding these companies are led by new fund managers? Are established funds on fund X (variable, not number ten) leading the way?Something Brad Feld mentioned on his blog that is relevant to whom gets funded is how VCs ask questions and how founders answer them. He links to an awesome Ted Talk about this.https://feld.com/archives/2…
We could also do similar graphs for male and female with, instead of amounts of money and numbers of deals, the number of babies (A) conceived, (B) carried to term, and (C) delivered and healthy.If we did that maybe we could suspect that the horrible, sexist gender gap would be even worse than for VC money and deals?So, we should start a movement, maybe a Go Fund Me, effort to close the horrible, sexist motherhood gender gap!!!!Maybe???
It will take awhile to balance out to where it’s not an issue (sex of founder) Competence and ability should be the first thing looked at during evaluation.Theranos got away with ongoing and right fraud because Holmes had been anointed as next big deal.
What’s with Disqus today? My comments are being removed/deleted. Maybe I need to comment better.
Yep. I just spent the time to reply to one of your comments. And when I hit post it gave me the attached. I will post a screenshot that I did of the comment and my reply. Great use of my time…. https://uploads.disquscdn.c… https://uploads.disquscdn.c…
Here was my reply:Not a reflection on what you are doing which is great but these MBWE programs are often a bit of shams in terms of how they can be gamed. I know this from dealing with it for a long long time. I have many examples of this over time being the case. It’s ‘opportunity theater’. It increases costs on government and in many cases is a handout (by not emphasizing low cost and quality).Example I looked today at NY State’s M/WBE Program:https://www1.nyc.gov/nycbus…The 51% is easy to game you just setup a separate company that is owned by ‘the wife’ and flow the jobs through there (just one example). Even the locus is flaky. For example there are numerous ways for a business that isn’t anywhere near NYC to get contracts. For example:Note: A business located outside of New York City and outside of the designated counties noted above may qualify for M/WBE certification if the applicant can prove a substantial presence in the geographic market of New York City. Substantial presence can be demonstrated by providing documentation that satisfies at least two of the following conditions: Maintenance of a bank account for at least six (6) months in the City, or engagement in other banking transactions in the City, and/or Possession of a license (i.e., by the business or by at least one owner) issued by a New York City agency supporting its ability to transact business in the City, and/or Proof of business transactions, or attempted business transactions, in or with the City more than once over the past three (3) years.Who comes up with this nonsense? Seriously read what qualifies in terms of doing business in the city. How easy is that?
No doubt. Agree 100%. Maybe a better test of MBWE ownership would be to whom do the capital gains accrue? If the spirit is to encourage MBWE entrepreneurship then the outcome for the successful ones would be they get gains. So, who’s getting the gain?
Apparently you just found a good example of “always look for the hidden agenda” and “follow the money”. So, some politicians come up with the M/WBE program and please all the voters who would be pleased by that which, soon, amounts to nothing more than last months newspaper or in the case of the formerly revered, highly self-esteemed, NYT, last month’s used Charmin.Next, some people, e.g., you, can actually READ the details and see that, really, the hidden agenda was MONEY from scamming the program, which was the intention all along.Hush, don’t tell anyone!!! No danger since we already know they can’t read!!!Since I’m only 70 miles north of Wall Street, maybe I’ll be able to get some $ from the program. I now have a note where I keep such things!!! Thx!!
No success in re-posting either comment (3 attempts each). Somehow you spotted this in the 10 seconds it was active. Thanks for noticing and commenting! I was unaware that linking to primary source research and Brad Feld’s blog was considered spam.
It’s not and I post links all the time and have not had an issue.This is one of the problems that we have in a world of ‘free shit’. There is no accountability and no person to complain to.
Adam Sher:are you able to screen shot the computer screen? If so what app are you using?Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT
I’m discouraged so I’ll just let my thoughts fade away. I’ll try again tomorrow. I’m not using an app, I go directly to AVC and post. I use Chrome as my web browser.
Same as most days. The code base is flaky.
(Trying for a third time with this post) I see things a little differently in these graphs. The second graph shows that female involved startups receiving funding peaked in 2014 but the proportion of them being funded increased since then. The first graph reflects the general trend that fewer funds are pouring more money into less deals.Who are the VC’s funding these female involved/lead companies? Is there information that details that the VCs funding these companies are led by new fund managers? Are established funds on fund X (variable, not number ten) leading the way?Something Brad Feld mentioned on his blog that is relevant to whom gets funded is how VCs ask questions and how founders answer them. He links to an awesome Ted Talk about this.https://feld.com/archives/2…
I think one of the hardest things about this data is that very rarely on the “at least one female founder” stat is the female founder the CEO and the one pitching. It’s great to show that our male co-founders are founding companies with more women, but I think that’s what the second stat is showing…more so than women CEO’s are getting more funding.
The first one tells a troubling story. Female founders are getting a tiny amount of the supply of venture capital and the percentages are not changing much.I don’t get how you can use the word ‘troubling’ if we don’t know the exact percentage of not only female founders ‘trying’ but also the ideas they are trying to get funding for. Maybe the ideas are not the type that are getting funding by men? Maybe it’s more than no ‘Rebecca Kaden on the VC team’ but it’s an idea that even a woman wouldn’t fund.Not that I doubt the direction but it’s like comparing murder rates in NYC vs. some small town. You have to factor in the population and a host of things to make sense of the data.
What you are saying in social science is called “controlling” on other candidate explanatory variables. There are some techniques, e.g., in experimental design, to identify what variables really matter. And there likely are some good statistical hypothesis tests that, with controlling on some obvious variables, would test the hypothesis that men and women are treated the same by VCs
Completely agree.So many people do the wrong things with their lives. That’s the only metric that matters.The rest of life is noise.
CONTRIBUTORS:The numbers actually tell a 2% percentage that went to funding Women founders hasn’t change from 2017.Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT
In another 10 years, we will have number on the returns from founding teams with or led by females.Want to bet $1000 that the returns are within 5% of historic numbers ( or less than historical returns ) ?Will make the same bet for female VCs.