Firms founded by women are set for a record-breaking fund-raising year after facing a disproportionate setback during the pandemic compared to firms founded by men.
During the pandemic, VC investments in US firms started by women declined at a higher rate than those founded by men did and took longer to get back to pre-2020 levels, according to new data from PitchBook.
While the overall venture capital market grew last year—with companies taking in $10 billion more overall than the previous year—VC investments in female-founded companies fell by 3% compared with 2019.
The PitchBook data also shows the preference for male founders shown in the pandemic is shortsighted. Companies with female founders delivered better returns in 2020, outpacing the overall market on combined exit valuations, which refer to the amount a firm is sold for.
Still, despite last year’s downturn, female-founded companies have received more venture capital funding this year than at any other point in the past decade.
A pandemic setback for female founders in 2020…
The covid-19 pandemic disproportionately affected working women in the US, as they lost their jobs at higher rates than men and were slower to get rehired. Millions of women left the workforce permanently as they struggled to balance work with the demands of home-schooling children, or helping out older relatives. Female entrepreneurs were dealt an economic blow by the pandemic, as well.
Between March and June 2020, when pandemic lockdowns slowed down business throughout the country, VC investments in companies founded solely by women declined by 28%. Over the same three months, investments in male-founded companies declined by a little over 5%.
Male founded-companies also recovered more quickly. By July, VC monthly investment in male-founded companies totaled nearly $15 billion, up from a low of $7.6 billion in April. Female-founded companies didn’t start showing growth until December, when the number of deals increased by more than 50% from the previous month, and the value of investments rebounded by three times what it had been in November.
…followed by a record-breaking 2021 for female-founded firms
While the bulk of venture capital funding has for years gone to startups founded and run by men, in recent years startups with female founders have started collecting more capital funding. That trend accelerated this year.
Companies with female founders lagged in the overall recovery of the VC market, but they’re now on track to receive more VC investments than at any point in the past decade, capturing 25% of total deals, or more than $40 billion, as of Sept. 30. And by some metrics in the PitchBook report, fund-raising by female-founded companies is even outpacing the overall VC market.
When it comes to exits, 216 firms started by women saw investors exit via IPOs or acquisition for a total value of just under $60 billion through Sept. 30—up from $24 billion in 2020. That was a new record for female-founded firms.
For the overall market, exit values doubled from 2020 to $582 billion, with a total of 1,150 exits. So while exits by female founders represent a smaller share of the overall market, their exit valuations are growing at a faster pace year-over-year.
The PitchBook data also indicates that companies started by women see quicker exits—since 2018 it has taken an average of 6.7 years for their firms to be sold, compared with the overall average of 7.7 years for all US startups.