Female Founders: the Paradox of Funding

We recently ran the 2023 Female Founder Awards (powered by Peoplepath) to lift others in our community up. Over 100 nominations were made by leading studios and VC funds from across the US and EMEA. We conducted interviews with dozens of early-stage female founders throughout the process, and picked up on core themes: 1. Female founders still face barriers, 2.  Female founders who overcome barriers to funding are more likely to realize a profit than homogeneous teams, 3. Networks are the most valuable asset in overcoming these barriers.

Female founders still receive significantly less funding than all-male teams. A study by Crunchbase found that in 2021, only 2.3% of venture capital dollars went to female-founded companies, compared to 77.1% that went to all-male teams. This gap is even worse for female founders of color. A study by Project Diane found that, of the 2,229 startups founded by Black women that received VC funding, the median amount raised was $100,000, compared to $1.5 million for all startups.

Yet, the data says investing in female founders pays off. A report by McKinsey & Company found that companies in the top quartile for gender diversity are 25% more likely to have above-average profitability, and companies in the top quartile for ethnic and cultural diversity are 33% more likely to outperform their peers on profitability. A study by BCG also found that women-led startups generated 10% more in cumulative revenue over five years than male-led startups, despite receiving less funding. Women-led startups also exit at a higher rate than male-led startups, with a 47% higher return on investment (ROI), according to a study by First Round Capital.

To succeed as a female founder, it is essential to have a strong and supportive network. Women in the business should seek out mentors and advocates who can provide guidance and support. A study by SCORE found that women who have a mentor are five times more likely to start a business than those who do not. Additionally, diversity is a strength when it comes to business success. Research by McKinsey & Company found that companies in the top quartile for gender diversity are 21% more likely to experience above-average profitability than those in the bottom quartile.

Peoplepath has two female founders, so it’s an important topic to us. But the data shows it should be important to everyone. We believe that with equal access to funding, female founders can thrive and contribute to innovative thinking and business success. By recognizing the challenges that female entrepreneurs face and working to create a more equitable and inclusive business environment, we can help to build a more prosperous and thriving economy.

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