It’s a well-documented fact that female founders receive less venture capital funding than their male counterparts. What is perhaps more surprising is that things haven’t improved—and have actually worsened—over the past year.
Venture capitalists invested $58.2 billion in companies with all-male founders in 2016. Meanwhile, women received just $1.46 billion in VC money last year, according to data from M&A, private equity, and venture capital database PitchBook. That massive disparity is due both to the differences in the number of deals and the average deal size by gender.
Number of deals
First, consider the volume of deals. In 2016, 5,839 male-founded companies got VC funding, compared to just 359 female-founded companies. In other words, companies run by men got more than 16 times more funding than companies run by women. (Companies with both male and female founders fared slightly better than those founded exclusively by women with 1,067 receiving funding.)
There was some positive news last year: Women-led companies made up 4.94% of all VC deals in 2016—the highest percentage in the past decade. It’s a paltry number, but a noticeable improvement from 10 years ago, when female founders were involved in just 2.95% of deals.
Dollar value of deals
While the percentage of the deals that went to women increased last year, women actually lost ground when it comes to the share of VC dollars. In 2016, women got just 2.19% of venture capital funding—a smaller piece of the pie than in every year this past decade, with the exception of 2008 and 2012.
The average VC deal for among women-led companies last year was worth $4.5 million—compared to $6.1 million in 2015 and $5.1 million in 2014.
Male-run companies experienced the reverse trend: They saw fewer deals, but larger average investments: $10.9 million in 2016, $9.7 million in 2015 and $8.4 million in 2014.
Why aren’t female-founded businesses getting more VC money? For Julie Wainwright, founder and CEO of consignment website The RealReal, it comes down to the lack of female VCs. “When you have different businesses that aren’t proven that may appeal more to a female [customer], a female investor is going to be able to evaluate that” better than a male investor could, she says. “I think in general, most VCs are trying to do their jobs, but there are a lot of unconscious biases.”
Currently, about 7% of partners at top VC firms are women, according to an analysis by TechCrunch. One female VC partner, Aspect Ventures’ Jennifer Fonstad, says that much of the problem comes down to a lack of access: Women entrepreneurs simply aren’t part of the (predominantly male) network of VCs. That venture capital is a boys’ club “hasn’t changed and I don’t think that will change,” she says.
There’s also the dreaded “I’ll ask my wife” response, which Thinx founder Miki Agrawal calls “the kiss of death.” A serial entrepreneur—she owns four restaurants and has founded two companies in addition to Thinx—Agrawal says that the danger of male investors asking the women in their lives for advice is that, more often than not, those women are not their target customers.
VC’s gender gap can cause an emotional disconnect between partners and founders, too, especially when it comes to industries that traditionally resonate with women (i.e. beauty and fashion), says Katrina Lake, founder and CEO of online clothing subscription service Stitch Fix. “I think that intangible stuff really matters. I had an investor say, ‘I think you’re amazing, but I have to pick one or two board seats a year and where I feel really passionate about the business, and I don’t think I can be passionate about women’s dresses and retail.'”
Joyus founder and CEO Sukhinder Singh Cassidy has some ideas about why women land smaller deals than their male counterparts. One possible explanation, she says, is that as in other areas of business, women ask for less. “One big theory is that women are asking for just as much as they need—same thing that women in the workplace do,” she says.
Kathryn Minshew, co-founder and CEO of millennial career site The Muse, has a different theory, saying that male- and female-founded companies are fundamentally judged differently. “There’s a lot of research that in business, women tend to be judged on performance and men on potential. The same is true in start-up funding in aggregate as well. I felt that we had generally raised based on what we have done,” she says, while male founders raise capital on what they have the potential to do.
Overall, female founders interviewed for this story agree that not getting as much capital as their male counterparts can be both a blessing and a curse. “[Women’s] natural conservatism means women end up owning more of their company and may get to profitability sooner than if they had all the capital in the world,” says Singh Cassidy.
“In many ways, I’m grateful that we were in a cash-constrained environment,” says Lake, who hasn’t raised capital since Stitch Fix’s last round of fundraising in 2014. The company has doubled its workforce in that time and is rumored to be profitable, though the CEO declined to confirm.
“We didn’t have big flashy headquarters with food from Michelin-starred restaurants,” she says of the company’s early days. Instead, she had to figure out “how the business is going to be healthy and how the business is going to be sustainable.”
While “counting cents” forces prioritization and discipline in founders, The Muse’s Minshew says investors don’t necessarily give credit for being able to grow on little cash. “The companies that are more comfortable spending a higher amount early are usually rewarded with higher growth metrics, but you don’t necessarily get bonus points for being cash conservative in the early days,” she says.
On the other hand, the fact that it’s easier for men to raise money at the early stages might “lull them into a false sense of security,” she says.