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Seeds of change: US venture capital swung (slightly) towards female founders in 2021

Near doubling of the capital that went to startups with at least one female founder.

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Venture funding has long discriminated against female founders, with men in the UK 86 per cent more likely to get funded than women.

There are signs that change is happening. Last year the value of US venture capital going to companies with at least one female founder jumped by over 137 per cent, seemingly an incredible increase.

That amounts to $54.8bn across 3,631 separate deals in 2021, according to PitchBook and NVCA’s Venture Monitor Q4 2021, a vast increase from the $23.1bn raised in 2020.

The figures—highlighted today by FT Partners’ annual Women in FinTech report launched to mark International Women’s Day 2022—show a similar jump for startups with all-female founders, with capital raised jumping over 82 per cent to $6.4bn.

However, while the absolute figures are impressive, as a proportion of all venture capital deals, women sadly still account for only a growing minority.

Those startups securing finance with at least one female founder rose from 25.1 per cent of all US VC deals in 2020, to 25.3 per cent in 2021, and all-female founder startups account for just 6.5 per cent of the overall deal count.

2021 was also an outlier for venture capital funding in general, as investment across the whole sector nearly doubled in a year to $330bn due to the pent up demand from 2020’s disrupted deal flow.

This sharp increase demonstrates how female founders in the US were, in fact, keeping up with their male counterparts, rather than making quite the progress that the headline figures suggest.

It’s not just the US that is struggling to close the gap between the fundraising of male and female-founded businesses.

In the UK the British Business Bank, the government’s economic development bank, last week published data showing that the appetite for raising external finance among female-led businesses remains lower than at male-led firms.

31 per cent of businesses led by women indicated they would be interested in raising external finance, versus 39 per cent of male-led companies.

“There is clearly more to do to get ethnic minority and women-led businesses on to a level playing field when it comes to accessing finance,” said the UK’s small business minister Paul Scully.

“The Government will continue to work with the sector, including through Start Up Loans and the Rose Review of female entrepreneurship, to ensure everyone has the tools they need to succeed.”

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