Why do 'female' startups attract less capital?



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Why do 'female' startups attract less capital?

What do the statistics say?

According to the latest statistics conducted and publicly published by Pitchbook on a monthly basis, exclusively female and mixed teams make up the minority in those startups that have successfully secured a financial round of venture capital or business angels.

In the first eight months of 2022, only 5.2% of female and 17.4% of mixed teams in the total number of European startups achieved successful fundraising, i.e. closed a financial round of venture capital or business angels.

When we look at these figures in the context of the total amount of capital raised, the data is even more devastating. In the first eight months of this year, of the total amount of capital raised for European startups, only 1% was raised by exclusively female founders, and an additional 12.1% by mixed teams.

In other words, 86.9% of the total capital raised was allocated to startups that have only male founders. The data for the USA is slightly better. In the first 8 months of the total amount of capital raised for American startups, only 2% was raised by exclusively female founders and an additional 14.8% by mixed teams.

These differences are not a matter of the current year (2022), but have been more or less stable over the past decade. So, the fact is that startups led exclusively by women, or those that have male founders in addition to women, attract less capital.

But what is unusual and rare is when women participate as founders of startups, whether it is an exclusively female founding team or a mixed team. The statistics really do not speak in favor of exclusively female or mixed teams.

They earn better

What is the cause of this? One of the biggest reasons is that venture capital funds themselves are often male-dominated at the investment decision-making level. Quite often, female founders who present their startup (pitch) are riddled with criticism and questions, and they are rarely asked a technical question, assuming that women do not have detailed technical knowledge.

Statistics also tell us that venture capital funds and other financiers are wrong to not support more startups with only female or mixed founders. One of the studies on the subject was conducted in 2018 by BCG and MassChallenge, a leading American accelerator program with more than 1,500 startups supported at the time.

In the total number of supported startups from that study, male teams predominate. However, investing in women's or mixed teams is far more profitable. Every dollar invested in a women's or mixed team returns an average of 78 cents.

In contrast, every dollar invested in an all-male team returns an average of only 31 cents. Additionally, startups with female or mixed founders typically have at least 10% higher revenues than male teams.