Venture capital activity has declined from the all-time highs of 2021, but new data shows that female founders in 2022 are proving to be resilient in the face of a much tougher and more volatile market. The fourth annual All In: Female Founders in the U.S. VC Ecosystem report, released by PitchBook, reveals that women founders managed to close more deal value three-quarters into 2022 than any year prior to the record highs set in 2021, proving the strength of their startups even amid fears that the market downturn would disproportionately impact them like the Covid-19 pandemic did in 2020.
Lower Median Burn Rates, Greater Valuation Growth, and Lower Valuation Declines
The report found that, even 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. Additionally, female-founded companies continue to outperform the broader market when it comes to the median time it takes to exit, despite the sharp decline in exit activity along with the rest of the VC ecosystem in 2022.
Female-Founded Companies Represent Only 25.5 Percent of Total VC Deal Count
Although the report shows that female founders are outperforming their male counterparts in various metrics, women still face significant barriers when it comes to VC funding. The newly released data shows that female-founded companies represent only 25.5 percent of the total VC deal count within the broader ecosystem – a slight dip from 26.4 percent in 2021.
Male-Dominated Check-Writing Authority Remains an Issue
Check-writing authority remains largely male-dominated, which in turn can have significant impacts on the capital-raising process for female founders, the PitchBook report states. The lack of female representation in firms has a ripple effect on the founders they invest in, as well as the limited partners that trust them to generate returns. 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.
A Call to Action
“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,” said Sarah Chen-Spellings, co-founder and managing partner at Beyond the Billion, which collaborated with PitchBook and J.P. Morgan to publish the report. “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.”