Things could’ve been worse, I guess.
Companies with all female-founding teams raised about $800 million, or 2.1%, out of the estimated $37 billion invested in U.S. startups in Q1 2023, according to PitchBook. In dollar terms, that is a 53% year-over-year decline from the $1.7 billion all-female founding teams raised in Q1 2022.
The decline isn���t a surprise. Venture and technology markets are not as confident as they have been in the past. A recession still looms, geopolitical upheaval continues and tech stocks aren’t faring well. When the economy is volatile, appetite for risk decreases, which impacts venture totals in general and certain founders in particular.
Female founders, already seen as inherently riskier than male founders, are often overlooked, ignored and stored away until the next global social movement awakens everyone’s intention for good.
Once again measured in dollars raised, mixed-gender teams also saw their venture totals decline on a year-over-year basis, raising $7 billion in Q1 2023. Last year, that cohort raised $15.8 billion.
The dollar amounts, however, don’t tell the entire story. Though they raised less capital in the first quarter of 2023, mixed-gender teams are faring better than ever in terms of their share of all venture dollars, raising 18.9% of the capital invested thus far this year in U.S. startups. The past two years saw them raise an average 17.5% of total funding.
As the year continues, this share will probably change for better or worse depending on the amount of capital invested in such teams and venture aggregates themselves.
Tracking venture dollars raised is a useful metric, if an incomplete one. We also want to know how many deals were struck in total, and by whom. Here, the data may surprise.
While the total number of venture rounds raised by all-female and mixed-gender teams was down on a year-over-year basis, in terms of their share of total American venture deal volume, all-female founding teams raised a slightly higher percentage of all transactions than they did a year ago. Mixed-gender teams were largely flat in terms of their own share.
American all-female founding teams completed 196 deals in Q1 2023 compared to 323 deals in Q1 2022. Those transactions represented around 6.9% of all U.S. VC deals so far this year, compared to the same period last year, when such deals represented an estimated 6.1% of all transactions.
Meanwhile, mixed-gender teams closed 688 deals this year compared to the 1,271 closed in Q1 2021, a slight decline in percentage terms, falling to 24.1% of all deals from 24.24%.
Much of the funding for female-founded companies is concentrated in the early stages, and, as usual, the Bay Area and New York were the markets where it landed the most.
Optimism remains
It’s difficult to predict how the year will shape up for female founders. Still, women-founded companies are starting off better than we might have expected. After one quarter, having raised 2.1% of all funding in 2023, female founders are ahead of the 2% they raised in 2022, though those numbers are bound to evolve as the year continues.
Mercedes Zhang, an investor at Manhattan Venture Partners, told TechCrunch+ that there has never been a better time to be a woman founder, despite the fact that Q1 data might indicate that things could worsen.
“Going forward, women have a lot of potential to reap the benefits since there is a record amount of dry capital and a never-before-seen number of women-focused funds ready to deploy,” Zhang said. “I advise women to think long-term when meeting investors, stay vigilant and keep their eye on the prize.”
MATR Ventures’ founder, Giselle Melo, echoed that sentiment, saying women founders and investors should continue to use their differences to their advantage and that LPs should take the hint that there is still more than enough time to push for change.
“Because so much data supports that women-led companies or companies with women leaders outperform, it’s logical that institutional investors seeking higher returns allocate a more significant share of their capital toward funds investing in women,” she told TechCrunch+.
Nina Mohanty, founder of Bloom Money, said this is a nerve-wracking time for her and other entrepreneurs, especially as layoffs continue and reports that venture investors have “tons of dry powder” continue to propagate.
At the same time, women founders are used to discrimination in the market, regardless of its conditions. Mohanty expects investors to eventually retreat back to their pattern-matching ways and said that because women founders have always been overlooked, they have always had to build in winter market conditions, meaning an actual winter market is more of the same for them. For that reason, she’s hopeful.
“I’m very optimistic for these companies to shine with their traction and revenue,” she said. As for her own company, she is focusing on building: “We’re cautiously optimistic. We’ve always been conservative with our burn. It’s actually been a nice time to keep our heads down and execute.”
Eve McDavid, founder of Mission-DrivenTech, agreed, saying she is hoping that this downturn will provide an opportunity for investors and the venture landscape to reset the archetype of what a successful founder looks like. She is actively fundraising for a pre-seed round and is confident she will succeed. “It’s important for these statistics not to discourage us, but rather, we should acknowledge the realities of the market and keep going,” she said.
The numbers, high or low, do little to falter ambition or optimism. No matter what the year brings, the percentage of funding to women has been stagnant for so long that to harp on about it feels rather fruitless. Bull, bear or bust, for the most part, women are accustomed to building and fundraising in adverse conditions, so for most, it’s business as usual. And that’s a win.
Comment