PitchBook, the premier data provider for the private and public equity markets, today released All In: Women in the VC Ecosystem, its fourth annual report examining US venture capital (VC) investment in female-founded startups and the role female investors play in their success. The report, published with support from Beyond The Billion, J.P. Morgan, Pivotal Ventures and Apex Group, found female founders have weathered ongoing market volatility to post the second-highest deal value figures on record. In fact, across most metrics year-to-date, female-founded companies proved the strength of their startups, dispelling fears that this market downturn would disproportionately impact female founders like the COVID-19 pandemic did in 2020 (2021 All In report). In this difficult market, female founders had lower median burn rates, greater valuation growth at the early stage and lower valuation declines at the late stage compared to all-male founded companies year-over-year. Angel investment and unicorn deal value among female-founded companies have both reached their second-highest annual levels. And, although exit activity fell sharply along with the rest of the VC ecosystem in 2022, female-founded companies continue to outperform the broader market when it comes to the median time it takes to exit.
Despite these wins, female-founded companies still represent only 25.5 percent of total VC deal count within the broader ecosystem – a slight dip from 26.4 percent in 2021. In a recent survey of VC investors attending the 2022 Web Summit, 32 percent of respondents said they had not made any investments in female-led startups in the past year and 27 percent said increasing representation of women and minorities in their firm or portfolio was not an area of focus at this time. Check-writing authority remains largely male dominated and can have significant impacts on the capital-raising process for female founders. In fact, just 4.5 percent of firms have a majority female decision-maker population, which means that most institutional investors are operating in male-dominated environments. Given female checkwriters are more likely to invest in female founders, any progress in representation at the institutional level could lead to a long-term ripple effect on the headline numbers for years to come.
To download the full report, please click here.
“Female founders are consistently showing up as high-performing startups, but they remain at a disadvantage when forced to pitch to predominately male checkwriters,” said Annemarie Donegan, analyst at PitchBook. “Check writers are a driving force for diversity in the VC ecosystem and the lack of female representation in firms has a ripple effect on the founders they invest in as well as the LPs that trust them to generate returns. Promoting and recruiting female check writers can open doors for more female founders and diversify portfolios. There is still much progress to be made within VC firms along with the startups that receive their funding.”
Following the methodology of the first three All In reports, PitchBook analyzed investment activity in US-based startups with at least one female founder. The report also includes a spotlight on female angel investors and GPs and breaks down funding activity within specific US regions and sectors, including tech, healthcare, and fintech.
Key Takeaways Uncovered by PitchBook’s 2022 All In: Women in the VC Ecosystem Report:
- Female-founded companies represent 25.5 percent of total VC deal count in the US year-to-date, down slightly from 26.4 percent in 2021, while their proportion of total deal value remains flat at 17.2 percent. While a plateau is not cause for celebration, it is a positive signal that market headwinds are not disproportionately affecting female founders like the pandemic did in 2020, when their proportion of total deal value dropped to 14.5 percent.
- Year-to-date, $32.4 billion has been invested in female-founded companies, meaning 2022 is already the second-highest year in terms of deal value after 2021’s outsized year.
- Investment to all-female-founded companies reached $3.6 billion year-to-date, matching the total deal value raised by companies with at least one female founder back in 2011, but still falling far short of the staggering $154.9 billion for all-male-founded companies this year.
- Median valuations of female-founded companies at the early and late stage have fared better than the broader VC market in 2022, with female founded early-stage companies growing by 39.2 percent compared to the broader market’s 33.3 percent increase. Late-stage VC valuations experienced minor declines amid market headwinds, but female-founded companies only fell by 2.9 percent compared to all US VC companies, which saw a 5 percent decline.
- Female decision-makers represent 16.1 percent of the national total in 2022. Furthermore, 95.5 percent of US VC firms have a majority male population of decision-makers. Studies and anecdotes suggest that female founders tend to seek out female investors and the chances of successfully securing financing can rise with a female investor in the room.
- The number of active female angel investors reached a record 935 in 2021. So far in 2022, 507 female angel investors have made at least one deal, demonstrating some deceleration. Female angel investment into female-founded companies, however, has already reached its second-highest year for deal value, representing a record 36.9 percent of deals with angel participation.
- Female-founded unicorns reached their second-highest annual level in terms of deal value, with $6.1 billion closed across 45 deals. Two female-founded unicorns, Deel and Talkdesk, achieved “decacorn” status – a post-money valuation of $10 billion or more.
- US VC exit activity for female-founded companies has reached $10.9 billion across 172 exits year-to-date, which is significantly lower than $73.3 billion closed in 2021 and $31.4 billion in 2020. The proportion of total exit value for female-founded companies jumped from 9.5 percent in 2021 to 18.2 percent in 2022, driven largely by a smaller population of companies exiting.
- This year is on pace to be the twelfth straight year that female-founded companies exited faster than the broader market, with the median time to exit of female-founded startups hovering at 7.2 years compared to all startups at 8.1 years.
The full report includes the following components:
- Executive summary
- Beyond The Billion feature
- Representation at the GP level
- Spotlight on angel investor Michelle Wie West
- Sector highlights
- Geographical breakdown
- Q&A with J.P. Morgan
- Female angel investors
- Female-founded unicorns
- Q&A with Apex Group
- Exit activity
- Pivotal Venture feature
- Key takeaways and methodology
To download the full report, click here.
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company’s data and analysis are available through the PitchBook Platform, industry news, and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York, London, and Hong Kong and serves nearly 100,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as a subsidiary.
About Beyond The Billion
Beyond The Billion is the world’s first and largest consortium of venture funds pledged to invest over $1 billion into women-founded companies. Beyond the Billion’s (BTB) first pledge campaign was launched as The Billion Dollar Fund for Women in October 2018 with an audacious goal of catalyzing $1 billion into the hands of women founders globally, addressing the gender venture investment gap where women were receiving only 2.2% of all venture capital funding. In under 2 years, $638 million of the first billion pledged was deployed into close to 800 women-founded companies, of which 11 have been recognized as unicorns. To continue to build on this momentum, the founders, Shelly Porges and Sarah Chen launched Beyond The Billion, to catalyze capital deployed to and with these venture funds, ensuring their continued capacity to invest by bridging LPs and GPs, building a community of institutional investors, sovereign funds, IFIs, DFIs, family offices, wealth managers and high net worth individuals; driving the agenda collectively.
Shelly Porges, Co-Founder and Managing Partner at Beyond The Billion
“In 2022, the key question we must ask ourselves is “Are women getting the ‘leftovers’ from VCs who feel little pressure to change how they do business?” Despite the fact that the world is looking for breakthrough solutions to some of our most intractable problems and women are innovating and delivering on these, our inability to transform a broken VC ecosystem prevents us from benefiting from these solutions and realizing the financial rewards of doing so. This year’s Pitchbook Report on which we are proud to partner, continues to demonstrate that women and gender-diverse teams outperform others in terms of earlier exits and higher valuations, even in a down-market. What does it take for investors to act on this data to ensure they not only have female founders in their deal flow but also founders being approved by their investment committees? We look forward to continuing this conversation with our partners and sharing the strategies of these investors who have made these changes and have benefitted from the outperformance women deliver.”
Sarah Chen-Spellings, Co-Founder and Managing Partner at Beyond The Billion
“Again and again, we see how female founders and gender diverse teams continue to outperform: with quicker exits, greater valuation growth and lower valuation declines at the late stages; and yet they remain underinvested. Against the backdrop of a tough fundraising climate, markdowns of previous vintages, and yet a lot more dry powder in the hands of VCs that were able to raise, it is now more important than ever to remain steadfast on the goal of bridging this gender venture investment gap with serious intentionality. It’s easy to “slide back” into bad habits of pattern-matching, where the perceived patterns of success still do not include women and people of color, despite the clear data as affirmed in this report. LPs and GPs have a role to play, and it is time to vote with the power of the check.”
Pamela Aldsworth, Head of Venture Capital Coverage at J.P. Morgan Commercial Banking
“While it’s encouraging to see some signs of rising female influence in the venture ecosystem, we have to keep at it to sustain this momentum and drive meaningful change. In the near term, this means staying intentional so we don’t backslide in a softer market environment. Longer term, with everyone playing their role, we will make progress. For those of us who are part of this ecosystem, let’s play our part to bring others in. If you can mentor – good. If you can give access to your network – do that. Everyone got their start somewhere, and everyone could benefit from a strong advocate on their side.”
Erin Harkless Moore, Director of Investments at Pivotal Ventures
“The 17 percent of venture funding that goes to female-founded companies tells us a lot about both the challenge and the opportunity in front of the industry. On the one hand, it reflects the fact that when it comes to VC support for women-led startups, the trendlines are moving in the right direction. On the other, 17 percent is nowhere near parity, a reminder that progress isn’t happening fast enough. Pivotal Ventures supports diverse founders and fund managers because we want to demonstrate that investing in entrepreneurs who bring a different perspective can generate significant returns. To tap into the opportunities it’s been missing, the investment industry is going to need to challenge itself to think in new ways and find a new approach to evaluating opportunities that leaves yesterday’s biases behind. We are excited to help make the case that putting more funding behind women and their ideas ultimately benefits everyone.”
Rosie Guest, Chief Marketing and Communications Officer at Apex Group
“With new regulation and a renewed spotlight on EED&I, firms are picking up the pace of change, however, the numbers, as well as the experiences shared in this report show that progress is still too slow, and that there is still much to be done. While regulatory change has opened the discussion on female representation, it must be accompanied by a shift in attitudes away from filling quotas towards solid recognition of the value that women bring to the table. With 10,000 employees worldwide servicing $3 trillion of client assets, we have a responsibility to disrupt the inequity of opportunity and progression in the financial services industry. We are optimistic for the coming year, as market dislocation will create entrepreneurial opportunities for female founders and investors, but we must not allow EED&I to become a tick box in the list of priorities for business leaders.”