Some have called 2018 the “year of the woman” and it certainly was the year of the woman in venture capital when it came to dominating the headlines. But the question is: Are female founders and venture capitalists better or worse off than they were at this time last year? The answer, something we clearly care about at All Raise, is well, it depends.
On the founder side, there is arguably no better metric of success than female-led companies hitting unicorn status, whether that be Glossier, Rent the Runway, or PagerDuty. The mere financial success of these companies alone is worth celebrating. That said, what’s even more exciting is that these companies demonstrate how strong female-led businesses (and by extension investments) can be to the global investment community.
Despite these laudable achievements, the overall statistics on the funding of female-founded businesses leave much to be desired. According to recent PitchBook data, the percentage of venture capital dollars that went to teams with one or more female founders (or a female CEO) dropped from 19% in 2017 to 14% in 2018. Even more striking than that, of the funded startups with at least one female founder, less than 4% were led by black women. And, if you look at the companies with exclusively female-founded teams, the percentage of venture capital dollars that went to them dropped from 2.7% in 2017 to 2.3% in 2018. A silver lining is that the total dollars to companies with female founders have increased. However, this in large part due to a handful of large later stage rounds raised by these companies, as well as the dramatic growth in venture dollars as a whole in 2018.
At the end of the day, who controls the dollars may be the strongest lever driving who gets the dollars. To that end, today we are sharing The Information’s VC Diversity Index, which leverages data collected by The Information and All Raise. The Index showcases the top 102 firms in the US with over $250M assets under management (AUM) and how they fare across diversity attributes like gender and race. Along with The Information, we recognize that diversity is much more nuanced and complex than illustrated in this ranking, but we felt it was important to highlight the progress being made across some firms. For about one-third of these firms, this was the first female partner added in the history of the firm. While adding one female partner is not enough and should not be seen by firms as “mission accomplished,” we can see that change is happening, even if the pace is not as swift as we would like.
As such, it is worth highlighting that female partners in the venture community went from 9% to 11%** in the last year alone — a key focus of the All Raise efforts that began this time last year.
Even so, there is work to be done. We have a long way to go with regards to getting more people from underrepresented groups into venture capital roles. Beyond that, it is hard to believe that 71% of venture firms still do not have a single female partner, and only 7% of firms have equal gender representation in their partnership. What may matter even more than the percentage of gender diversity in any given firm is the amount of capital female partners control. The 59 institutional female-led funds that currently exist today only manage ~4% of total US AUM. For female venture capitalists to help move the needle on these trends, they must control a larger percentage of the assets because female partners invested in two times as many female entrepreneurs as their male counterparts. Therefore, if we can get more money in the hands of women and a diverse group of fund managers, we can fundamentally shift our ability to move the needle on who gets the capital.
So, where do we go from here? We should take a moment to recognize our successes: Female unicorns, traditional funds becoming more diverse, female-led funds charting new territory, and early and catalytic organized efforts by groups like All Raise to support industry-wide change. We also need to understand that data alone is not enough. It will take continued stories of success to make the financial benefits of investing in diverse and intersectional teams obvious to everyone. It will take examples of firms adding not one, but multiple female partners. And, most importantly, it will require an understanding that change won’t happen overnight, so a mix of patience and persistence is necessary to truly achieve equality. The good news is, this isn’t just about social justice or equity, this is truly in everyone’s financial interest, as venture capital plays a critical role not just as an economic engine for this nation, but a source of innovation for the US and the world more broadly.
Let the headlines continue, the numbers shift, and let us be back here next year with more examples of progress at every level.
Jenny Abramson and Eva Ho
** U.S. venture capital firms with fund size over $25mm