In Numbers Global Female Entrepreneurship
The global rate of female entrepreneurship has been growing faster than that of male entrepreneurs, with over 250 million women worldwide engaged in entrepreneurship, according to 2020 data from Visa. But findings show that raising capital remains a big challenge for female founders, and they disproportionately bore the brunt of tightened investor dollars last year.
With the emergence of the novel coronavirus in 2020, a growing body of research has warned of a gender regression on what had been slow but still considerable progress in the venture capital (VC) world. Research by Visa found that 79% of female entrepreneurs in the U.S. feel more empowered now than they did five years ago, yet 66% report difficulty in obtaining the funding they need. Similarly, a 2019 Columbia Business School study showed that ventures led by women are 63% less likely to receive VC funding, despite being just as likely to achieve exit outcomes through IPOs or acquisitions as ventures led by men, if they receive support.
In 2010, only 3% of invested dollars went to female-only founded companies and in 2019, almost 10 years later, the figure remained at just 3%, according to a “Funding to Female Founders” report by CrunchBase. Over that decade, female-only founders raised an average of 13% less than male-only founded firms and 10% less than female-male co-founded companies.
Globally, overall deal activity for female-founded firms plunged last year, with women founders receiving 4.3% of venture deals in the first quarter, down from 7.1% compared to the same period a year ago, data by Pitchbook found. The problem continues at the source of funding opportunities. A Crunch Base “Women in Venture” report revealed that only 7% of partners or decision-makers at the top 100 venture firms are women.
Beyond business owners, COVID-19 has impacted employed professionals too. “COVID-19 has disrupted the workplace in ways we’ve never seen before,” highlighted the annual “Women in the Workplace” study by McKinsey & Company and LeanIn.Org. The report pointed to signs that women are leaving the workforce at higher rates than men.
In 2020, investors also adopted a more risk-averse approach to capital deployment and doubled down on existing portfolios amid shelter-in-place orders and travel restrictions. As a result of these dynamics, McKinsey & Company discovered that 1 in 4 women are contemplating downshifting their careers or leaving the workforce.
Alongside support networks for startups and greater representation of women in leadership, female entrepreneurs need the same funding opportunities as their male counterparts to reach their full potential as founders—VCs and investors still need to catch up.