Female founders smashed funding records in 2021 — but there’s still a widening gap

Companies started by women raised more money than ever, but are still undervalued compared to the rest of the startup market.

Businesswomen collaborating in a meeting room.

Women-founded startups have raised a record amount of money this year.

Photo: monkeybusinessimages/Getty Images Plus

The pandemic took a toll on female founders in 2020: Funding to their companies fell 3% even in a bullish startup climate that saw overall venture funding rise by 16%.

But funding to female-founded companies has roared back in 2021 and smashed existing records, according to a new report from PitchBook on female founders in the U.S. Funding to female-founded companies reached $40.4 billion in the first three quarters of 2021, far surpassing 2019's record of $23.7 billion. Investors profited, too, with female-founded firms recording an all-time high of $59 billion in exits in the first three quarters of the year.

Still, despite the record numbers, PitchBook found there is a widening gap between the overall U.S. startup market and female-founded companies.

The median late-stage private valuation was $70 million for U.S. startups in 2020, but only $59 million for female-founded companies. So far in 2021, the median for the market has jumped up to $120 million in an exceptionally frenzied market, but for female-founded companies, the median is only $100 million — nearly double the dollar gap from 2020. The gap also widened in the early-stage market, where the median startup valuation for female-founded companies trails the overall market by nearly $6 million.

 Charts showing funding to female-founded startups Charts: PitchBook

"Funding to female founders is rebounding, and it's in line with the market growth as well," said Sarah Chen, co-founder and managing partner of Beyond The Billion, which works with funders who invest in female founders.

All-female-founded companies saw 28.1% less investment in the pandemic's earliest months of March to June 2020. All-male teams only saw a 5.4% slip during the same time period.

"In the time of a crisis, there's a reversion to bad habits," Chen said, pointing to behaviors like pattern-matching.

Chen remains "cautiously optimistic" about female founders and funders in the VC ecosystem. The gap aside, funding to women set new records, and there's also an increase in female funders. The percentage of female GPs at firms with over $50 million in assets under management rose to 15.4%, according to PitchBook's report. New York City in particular had the biggest jump among major VC hubs from 11.8% to 16.8%.

There are also plenty more active female angel investors in venture capital. In 2011, PitchBook estimated there were 125. A decade later, the number is 895 as of Sept. 30, the report said. The rise is significant not just for the investors themselves, who stand to profit from startup deals, but for who they're backing, Chen said. The research showed that female angels are backing more female founders.

The funding environment remains crazy, but unlike during the pandemic when female founders were left behind, this time the rising tide is floating all boats. Chen just cautions that the industry can't get confused by what's happening on the macro level and miss the gaps that remain — and are getting worse.

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