Women in Venture Capital in 2020

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Written by VentureXchange

October 6, 2020

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In 2019 there was not only funding to female-founded companies and new female-founded unicorns, but also women in venture capital. Moreover, according to a recent article by Fortune, the number of venture capital firms with two or more female partners doubled last year to 14%. That suggests a cultural change is underway in one of finance’s most intractable all-boys’ clubs. In 2019 52 women became VC partners or general partners for the first time.

The number of firms with zero women as partners is still a majority. At the end of 2018, 85% of firms did not have a single female partner. At the end of 2019, that number was 65%.

Several of the industry’s top firms have now added two or more women to their leadership teams. Sequoia Capital, Lightspeed Venture Partners and Andreessen Horowitz all have multiple female partners.

The venture capital industry has met with both cultural and economic pressure to consider gender diversity. Morgan Stanley recently estimated that venture firms that fail to invest in women and other underrepresented minorities risk losing out on as much as $4 trillion.

Still, some minority groups remain woefully underrepresented in venture capital and have made few gains in recent years. Let’s dive in and put those numbers into context. All Raise has been tracking VC partner additions by gender since 2017. We will outline in this article data by All Raise studies with the focus on women in venture capital.

Source: All Raise, according to Pitchbook

In 2018 more than $46 billion was funnelled into female-founded startups, more than doubling 2017’s value. For perspective, only $3 billion went to female-founded startups in 2010, translating into a more than 15-fold increase over the past decade.

With the record number of new female partners and general partners last year, that percentage has improved to 13% as of February 2020, according to PitchBook. 

Female-founded startups are exiting at an increasing pace. 2018 saw $26 billion in total sales (through acquisitions or IPOs) for female-founded startups. Female-founded startups take substantially less time to exit than the broader market, a rarely noted trend that indicates a key metric of success.

Future of VC is, without a doubt, more women, more people of diverse backgrounds, and allies working together to identify and fund startups.

 

Tech VC deal activity

 

While female-founded tech startups make up nearly 20% of all VC-backed tech companies, they bring in a lower percentage of all tech investment dollars (12.2% in 2019 YTD). Female founded startups are an increasing part of that story, rising from 10% of the VC-backed market in 2009 to 19% by 2018.

More importantly, the sheer number of female-founded, VC-backed tech startups has grown significantly, from 410 companies in 2009 to over 2,700 last year.

Moving forward, tech ecosystem with female entrepreneurs in the thousands (instead of in the hundreds) bodes well for the industry going forward.

 

Female Investors

 

Assessing startup founders and their ideas come with more risk than model-based sectors such as trading, investment banking and PE. One major barrier to female founders raising VC is a persistent lack of female decision-makers at VC firms. As of August 2019, about 12% of venture firms and angel groups in the US had women in decision-making roles at the investment level.

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