Why The Funding Decline For Women-Led Startups Is A Disaster And Needs To Change

Congratulations investors. We’ve now stooped to a new low of 1.9%.

In case you missed it, the startup investing ecosystem took a nose dive again. It was a nose dive of about 0.5%, and represents the amount of U.S.-based venture capital dollars allocated to women-led startups in 2022.

1.9%.

1.9%.

And that’s down from 2.4% in 2021, which was down from 2.7% in 2020, the highest it’s ever gotten (and 2.7% in and of itself is pathetic.)

I’ve been sitting on this data for a little bit, because it never gets any easier to continue to digest and internalize as our reality. Despite being lucky enough to wake up every day and work with amazing founders, investors and ecosystem builders – talk about positive energy – I have a never-disappears pocket of pure rage that I regularly manage, and sometimes have to talk to and work with directly as we plug away to reach our North Star.

1.9%.

In case it’s not clear: This is not just sad. It’s shameful. It’s embarrassing. It’s disgusting. It’s telling.And it’s unacceptable.

Still unacceptable. Unacceptable again. Always unacceptable. Again. Still….. I’m tired.

When is it going to change? How much do we need to keep talking about it?

I’m not going to link out to data set after data set that points to the continued benefits of investing into women founders (and founders from other traditionally underfunded groups), or the data sets pointing to the true misery of the numbers (see above). Certainly not going to give you anecdotes.

And there are also a couple of things I just really, really don’t want to do.

I don’t want to take another year trying to convince people of the situation, and presenting data. I don’t want to take another year encouraging people to change their mindsets. I don’t want to take another year to figure out the other ways our industry can get crucial growth capital to women-led startups. Yes, we’ll still do all of those, but boy ‘o boy – and I use that term very intentionally – I sure don’t want to.

No, we’ve reached a point where the long-brewing calls for accountability need to be front and center. Because it’s now extremely clear that if we don’t, we will only go down from 1.9%. If we wait one more year, we will only go down.

The day James made an introduction

One of my favorite contributions in the last two years has been a piece about a man named James, written by Rebekah Bastian (who herself is building fantastic tools to elevate the women around her).

James is a guy – not a bad guy – who does some things, important things, for a few of the women in his life. He’s very proud of this, and, at the end of the day, he pats himself on the back, and he makes his family (of all women), the best cinnamon toast they’ve ever had. Because “that’s just the type of guy he is.”

I come back to this piece a lot. One of the main driving points is that “people in positions of power in corporate America – which, more often than not**, are white men – are increasingly congratulating themselves for doing the bare minimum when it comes to gender equity.”

This can be exactly translated to the VC space, and is proving itself through the numbers. I said I wouldn’t give you anecdotes, but, for the sake of storytelling, here are just some of the ways this can play out:

Firms creating mini funds to earmark capital for traditionally underrepresented founders. And by mini, I mean less than 2% of their overall AUM (pay attention to the numbers here!), run by fund managers who are not even afforded full decision-making capabilities to write out cheques. Good for you.

Investors congratulating themselves for making that one investment into that one woman-led company, and it’s doing pretty well! Good for you.

Fund managers speaking on panels and getting quoted in the press about their commitment to leveling the playing field – sometimes even with “Women Founders are the Future” tee shirts on! – while actions behind the scenes would suggest otherwise. Good for you.

Firms writing out the largest cheques we’ve ever seen to non-women founders who’ve not only gloriously failed before (“failure is good!”), but are known quite globally for being absolutely toxic additions to the ecosystem. Good for you.

Investors continuing to lean on stats about making deals into mixed-gender teams – teams with at least one woman – (or media continuing to highlight the “good news”have “skyrocketed” to, in this case, 17.2%), with a complete lack of acknowledgment that little to no research or data collection has been done on this particular sub-set of startups in regards to gender dynamics (it needs to be done), and that it’s likely “skyrocketing” because of the exact same awful set of behavior that’s also gotten us to the 1.9%. Good for you.

Or full circle, how about this extremely simple, but stark one:

Traditional investors patting themselves on the back for any of the above or 100 other “good deeds”, and still being 100% responsible for a 30% decrease in capital allocations to women startup founders from two years prior. Reminder that it’s a 30% decrease from the already pathetic number of 2.7% in 2020.

Our entire industry is one big James moment, over and over and over again.

**There is a link here in the original, sending you to data, in case you needed it to make sure it was true. You can go there to get that data.Or you can just say “yes, that’s true”.Your choice.

This article was written by Kate Brodock and originally appeared on Switch.