Measuring Female Founders – An Update

In the ever-evolving entrepreneurship landscape, female founders continue to make significant strides despite persistent challenges. This article delves into the progress and obstacles women face in the startup ecosystem, drawing from various sources to provide an updated perspective on the state of female-led ventures. By examining data from 2015 to 2023, we uncover both encouraging trends and lingering disparities in funding, representation, and support for female entrepreneurs. The article highlights both the progress made and the work that remains to be done to create a more equitable startup ecosystem. By shedding light on these issues, I aim to foster a deeper understanding of the challenges faced by female founders and inspire continued efforts to support and empower women in entrepreneurship.

A 2015 article by Lisa Calhoun in Inc. caught my eye recently. In it, she lists 30 facts about female founders. [1] I coach life science startups on customer discovery, and I have a particular interest in serving female and under-represented founders, so I dug into the list. It’s almost 10 years old, and as I read through the stats, I wondered what more updated information might tell us. A search revealed more recent data from places like Statista [2] and Pitchbook [3]. Let’s dig into this information for an updated view of the founders of the female persuasion.

Confirming the Facts

First, let me say that the original facts in this article were almost impossible to confirm. This is no slight on Lisa Calhoun, who founded and successfully leads Valor Ventures , one of the strongest early-stage funders in the Southern US. It’s more the fault of Inc. for not providing their thought leader with some editorial backup. I’m also not thrilled the magazine chose a photo of Lynda Carter in her Wonder Woman role. It appears to emphasize female founders as unique superwomen when in fact, they can be found in every community and maybe friends or neighbors. Fortunately, Ms. Calhoun posted an updated version of her thought piece on LinkedIn [4] with one additional fact (#29), plus links to original sources. I recommend you skip the Inc. version and go straight to LinkedIn.

Crunching the Numbers on Female Founders

Let’s start with the numbers. Crunchbase listed 555 startups with female founders in 2014 [4]; my search this year shows there are 9,299 with at least one female founder in Crunchbase’s Top 10,000 list [5]. These companies have reported 29,978 funding rounds with a total funding amount of $211.4B. This isn’t an apples-to-apples comparison; by contrast, the platform’s Top 10,000 list of US startups represents 9,925 companies with $626B raised over 37,084 rounds.[6] The two Crunchbase Hub lists point out a fact repeated often in other research – companies with at least one female founder are likely to raise less than those with predominantly male founders.

Where Are the Facts About Female Founders?

What troubled me most was the difficulty I had in verifying the “facts” in Ms. Calhoun’s articles. The Inc. version did not include many source references. Many of the listed source references in the LinkedIn article weren’t verifiable (except the Inc. references). The First Round Project’s 10-year report (#29) was verifiable. [7] They analyzed their pool of 300 companies and 600 founders to share their 10 points on what a great seed-stage investment looks like. The sole sex-disaggregated point is companies with a female founder performed 63% better than those with all-male founding teams. Some of the other points reinforce widely recognized investor biases – where younger founders, those from “top schools,” and those with experience at the FAAMGT companies outperform their peers. Some interesting facts that run counter to popular opinion include repeat founders not outperforming first-time founders and companies formed outside of NYC, and San Francisco performing just as well as their big-hub peers. First Round has been active since 2004, and they could significantly benefit the community with another internal data review. I’d particularly like to see what they do to counteract selection cognitive bias.

Alternate Sources – A Statista Report

The Statista report assembles and reports global data on the share of female-led startups, the observed gender financing gap, and the impact of accelerator participation, workplace harassment, and the pandemic on female-led startups. Two points were readily comparable between the Statista and Inc. articles: the number of startups with female founders and the amount of funding they received.

• Number of Startups with at least one female founder: Then: 18%, Now: 20% [4,2]
• Share of VC Funding for startups with a female founder: Then: 12%, Now: 12% [4,2]

Another interesting comparison from the Statista report points out how accelerator participation is valuable for both sexes but helps male founders raise more equity.[2] The average equity raised by male-led startups after participation in a business accelerator was more than double that raised by female-led startups in 2020 (104.3K vs. 47.8K). There was a pre-acceleration gap (45.7K vs. 25.4K), but acceleration clearly benefited males more than females. Nevertheless, participation in an accelerator helps female founders grow revenue. [2]

The Statista report also notes that these differences exist despite the clear and repeatable fact that female founders generate more revenue per dollar of debt raised. [2] The authors ended their report with a lightweight assessment of factors deterring women from entering the startup scene (only workplace harassment, gender discrimination, and the impact of the pandemic were covered). One can’t help thinking they didn’t have a full suite of sex-disaggregated data to evaluate factors like investor cognitive bias and variation in male/female founder evaluation.

Alternate Sources – A Pitchbook Report

I can’t leave off a data article without looking at Pitchbook results. From the March 2023 “All-In: Female Founders in the VC Ecosystem” report,[3] while 2023 was a tough year for all founders, female-founded companies reached a record proportion of deal value in 2023 at 22.8%. The report notes there remains a significant funding gap between female founding teams and all-male founding teams, widening further for teams with all-female founders. Funding barriers noted include female founders pitching more modestly instead of “swinging for the fences,” facing deeply entrenched attitudes of discrimination, and seeing continued inequality in the ranks of VC firms. In a report insert, Heather Gates of Deloitte & Touche notes that they are seeing a commitment to meaningful DEI policies as a positive trend within VC firms. In biotech and pharma (my domain), “female founders consistently close billions of dollars in VC rounds each year.” [3] The proportion of total deal value going to female founders also varies significantly depending on the company’s location.

The Take Home Message

Despite these challenges, female founders continue to launch and grow their companies in the face of these difficulties. The Pitchbook report notes that while female founders face the same economic stressors as male founders, their cumulative deal activity continues to grow, and female founders represent a growing share of total VC activity. [3] Perhaps that’s one reason Quek Jie Ann of CNBC found that “It’s an ‘amazing time’ to be a woman in business.” [8] A shift in perspective should improve fund returns since women-owned startups generate 73 cents of revenue per dollar invested, compared to 31 cents per dollar from the male-owned peer group. [9] Our job as thoughtful ecosystem participants is to continue asking questions, challenging cognitive biases, and supporting collecting and analyzing disaggregated data for founders of all demographics.

References

[1] Lisa Calhoun, 30 Surprising Facts about Female Founders. Inc., July 6, 2015. Accessed April 15, 2024. https://www.inc.com/lisa-calhoun/30-surprising-facts-about-female-founders.html

[2] Statista, Female startup founders worldwide – statistics & facts. January 10, 2024. Accessed April 15, 2024. https://www.statista.com/topics/4691/female-founded-startups/#topicOverview

[3] Pitchbook, “All In: Female Founders in the VC Ecosystem,” March 6, 2023. Analysis by Annemarie Donegan and Data by Sara Good. https://pitchbook.com/news/reports/2023-us-all-in-female-founders-in-the-vc-ecosystem

[4] Lisa Calhoun, 30 Surprising Facts about Female Founders. LinkedIn, October 5, 2015. Accessed April 15, 2024. https://www.dhirubhai.net/pulse/31-surprising-facts-female-founders-lisa-calhoun

[5] Crunchbase.com , “HUB: Startups with Female Founders (Top 10K).” Accessed May 13, 2024. https://www.crunchbase.com/hub/startups-female-founders

[6] Crunchbase.com , “HUB: United States Startups (Top 10K).” Accessed May 13, 2024. https://www.crunchbase.com/hub/united-states-startups

[7] First Round 10-Year Project, 2015. Accessed May 13, 2024. https://10years.firstround.com/

[8] Quek Jie Ann, “It’s an ‘amazing time’ to be a woman in business: Female founders say the entrepreneurial landscape is changing.” MSN.com , January 4, 2024. https://www.msn.com/en-us/money/smallbusiness/its-an-amazing-time-to-be-a-woman-in-business-female-founders-say-the-entrepreneurial-landscape-is-changing/ar-AA1mtO7Y , Accessed June 28, 2024.

[9] Abouzahr, K., Taplett, F. B., Krentz, M., & Harthorne, J. (2018). “Why Women-Owned Startups Are a Better Bet.” Retrieved from Online: https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet . Accessed June 28, 2024.

I wrote about Female Founders back in June of this year, and you can read that post here .