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Venture capital has remained hardy in the face of a national economic downturn induced by the COVID-19 pandemic, with funding in the third quarter of 2020 for U.S. startups hitting a seven-quarter high. But a surprisingly small percentage of that money went to female founders, according to a new report.
The report, which PitchBook released Thursday, found venture capital funding for startups with female CEOs hit its lowest quarterly amount in three years last quarter.
“While overall US venture capital investments in 2020 are on par with previous years, those funds haven’t necessarily reached female business owners, dealing them a disproportionate blow,” PitchBook’s Priyamvada Mathur wrote.
The data is stark. PitchBook scraped its data to discover that firms invested a total of $434 million in female founders. That’s the lowest quarterly amount since 2017. It’s down by nearly half of the previous quarter.
Female venture capital partners and business leaders interviewed for the report blamed the slowdown on a number of systemic factors including increased responsibilities at home and economic turbulence falling disproportionately on women, forcing women to hold onto their regular jobs this year instead of founding new ventures.
Perhaps more critically, is that risk-averse investors put more money into their existing portfolio companies, which tend to be run by men.
“We are not surprised,” April Dominguez, who co-founded networking startup Handsome with her sister Nikki, told Business Insider. “When COVID hit, investors immediately had to turn and take care of their current portfolio companies, of which the majority of those companies are white males.”
Kate Brodock of the W Fund, which funds startups founded by women and other underrepresented people, called the results of the report “disappointing and frustrating, to say the least.”
“The data suggests that the traditional funding structure has still not responded to the well-voiced issues regarding systemic gender and racial bias that have been researched and made widely public for many years,” Brodock told Business Insider.
Although funding for female-led startups has grown over time according to Pitchbook data, the same data finds that only 2.6% of funding invested in venture-backed U.S. startups last year went to companies founded solely by women. And a recent study from DocSend investigating how investors interact with pitch decks found venture capitalists became less likely to fund a startup the moment they realize it’s funded entirely by women.
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Source:: Business Insider