It’s a difficult funding environment for female entrepreneurs in today’s technology industry, where less than 3 percent of venture capital dollars went to all-women founding teams last year. But the imbalance is also evident for follow-on funding rounds.
New numbers released by PitchBook show that 39 percent of U.S. VC-backed startups with all-male founders (6,559) received follow-on funding rounds since 2008. That compares to 30 percent of companies with all-female founders (374) who landed a follow-on investment, which also represented just 1.5 percent of all VC rounds since 2008.
All-male founding teams also receive an average of $4 million for their first follow-on round, compared to $2.4 million for all-female founding teams.
The numbers from PitchBook, the Seattle-based funding and M&A database, were first reported by Axios.
Leslie Feinzaig, founder of the Seattle-based Female Founders Alliance, said the data is consistent with what FFA members report.
“There’s a systematic issue at every stage of formation, advancement and financing for female-led highly-scalable companies,” she said.
Despite the efforts of many to level the playing field for female entrepreneurs, the numbers haven’t improved much over the past several years, as this TechCrunch column noted last month. Part of the issue, wrote journalist and software engineer Jon Evans, is that investors could be making a “a deeply cold and cynical bet.”
“… looking at their portfolio, it’s possible that venture capitalists are, consciously or not, maliciously or not, actually making a deeply cold and cynical bet: sometimes — often — betting on (relatively) mediocre white men on the grounds that their systemic advantages outweigh any/all greater talent and ability of underrepresented counterparts in whom VCs could invest,” he wrote.
It could also be related to a lack of diversity within VC firms themselves. More than 500 venture-backed entrepreneurs in March put their support behind Founders for Change, an initiative that launched out of the #MeToo movement and aims to increase diversity among VC firms. A 2016 survey conducted by the National Venture Capital Association and Deloitte found that 11 percent of VC firm investment partners were women.
Feinzaig said the data about follow-on funding rounds should represent an opportunity for investors because “female founders are the grittiest in the world.”
“You have to be an abnormally talented and gritty entrepreneur to persist in the face of these odds,” she said.
“I personally think that when 98% of capital is invested in only 2% of any population, that’s not just a gender gap, it’s a market inefficiency, and market inefficiencies correct themselves when you introduce transparency,” Feinzaig said.
She added that there is an ongoing “market correction in the works” and pointed to new funds from firms like Backstage Capital and Female Founders Fund. “I believe that fortunes will be made by those on the right side of this market correction,” she said. “The good news is that you don’t have to be a female founder to participate — you just have to invest in us.”
Moz co-founder Gillian Muessig cited a recent study showing that women are considered more trustworthy by Kickstarter backers and more likely to get those projects funded.
This stands in stark contrast with the difficulty faced by women seeking venture capital for full-fledged companies, said Muessig, who is addressing the problem with her new Sybilla Masters Fund, focused on investing in companies with at least one female founder or C-level executive.
“This is a stunning display of unconscious bias at both ends of the spectrum,” she said. “Society at large sees women as being more likely to succeed in small matters such as making a product and shipping it as promised to early supporters, but not seen as being capable of running multinational corporations.”
Editor’s note: Story updated with comments from Muessig.