2020 Was a Tough Year for Female and Non-Binary Founders & Funders
…Despite Record Setting Venture Capital Deployment
By Jenny Abramson (@abramsonjenny) Founder & Managing Partner, Rethink Impact; Co-Lead of All Raise Data Team
As U.S. venture funding continues to hit record highs, All Raise’s Annual Report analyzing VC hiring and investment trends in 2020 shows that female and non-binary founders were hard hit — and that this is especially true of women in underrepresented groups such as Black or Latinx.
The socio-economic impact of the pandemic on women should come as no surprise, as it has been covered extensively in the press. Studies have shown that significant numbers of women left the workforce in 2020. Women, transgender, and non-binary people, along with Asian, Black, Latinx and indigenous people also experienced more harassment in remote work than they had in person.
The VC industry is no exception. Our analysis of 2019 VC hiring and investment data showed that after years of homogeneity across VC, we had started to head in the right direction: the number of female checkwriters at venture capital funds was increasing, as was the percentage of VC deals and dollars supporting female and mixed gender teams.
Our latest analysis of 2020 data shows that the pandemic year precipitated a backslide for female founders’ access to funding — as well as those writing the checks.
Investments in female-led companies (defined as mixed gender founding teams) went down by 2.2% versus the increase we saw in 2019. The percentage of funding that went to all female-led companies went down marginally as well. This decrease is even more stark when we look at female-only led teams and mixed gender founding teams together: funding for teams with at least one female founder fell 2.5% in 2020. Of note, Black and Latinx female founders receive disproportionately low levels of venture funding — 0.64% (Source: ProjectDiane2020 /digitalundivided). When female-led teams (a definition which includes mixed gender founding teams) did get money, at every stage — from angel to late-stage rounds — the round sizes were significantly lower in size, 15% to 49%, than those backing their male counterparts. Alarmingly, this divide is trending exponentially worse, particularly at the later stages.
Funding for teams with at least one female founder fell 2.5% in 2020…When female-led teams did get money, at every stage, the rounds were significantly lower in size than for male counterparts. Alarmingly, this divide is trending exponentially worse, particularly at the later stages.
Beyond making the case to investors on why investing in gender diverse teams can boost financial returns, data has shown that female venture capital partners (i.e. check writers) invest in twice as many female entrepreneurs as their male partners (source: Kauffman Fellows). All Raise has focused on driving change through tracking the number of women elevated to check writer status, namely those with decision-making power in the venture ecosystem. To further visibility efforts in this, we’re excited to partner with Crunchbase on a dashboard designed to be an ongoing resource to share the progress–or setbacks–on a quarterly basis.
While the 2020 percentage growth in female check-writers wasn’t quite as high this year — 1% — it is proportionally on par with recent years, and 41% of all new 2020 VC partners with check-writing power were women. Looking at the data with an intersectional lens, the vast majority self-reported as white or Asian, with only one self-reporting as African American and zero as Latinx. There is so much more work to be done to ensure that those writing the checks better reflect the world around us.
Many of these women (31%) were promoted internally, likely an acknowledgement of the now more common understanding that having more women at the top of your firm is good business and helping your own talent get there is a best practice. Yet, sixty-four percent of firms still have no female checkwriters, so our work certainly remains on this front as well.
64% of VC firms in the US with more than $25M in assets under management have zero female checkwriters.
What is striking about these 2020 declines, something I am particularly dedicated to solving as the Founder & Managing Partner of Rethink Impact (the largest U.S. venture capital fund investing in female leaders), is the fact that 2020 was also the third consecutive year (despite the pandemic) that the venture industry deployed record-setting capital of $156 billion! In an industry where more than 85% of capital goes to all-male founded teams, 2020 just reinforced these numbers. Women, particularly women of color, are disproportionately held back while being asked to do more.
As I write this on behalf of the entire All Raise Data Team, who works tirelessly to partner with data leaders at Crunchbase, PitchBook, and beyond, I’m reminded of the old expression– you can’t change what you don’t measure. Accurately measuring the state of women and all underrepresented entrepreneurs and venture capitalists has never been more crucial than in years like this, as it shines a light on the importance of this work and the need to redouble our efforts to build a more inclusive ecosystem, including mobilizing the VC industry to look beyond their existing networks and intentionally diversify their investments. Together we can ensure power structures are distributed more evenly — but it’s going to take all of us.