By Keerthi Vedantam for Stacker

Women-led startups receive only about 1.8% of venture capital funding
At least 5% of all startups in the United States were founded by women in 2023

Though venture funding involves hard numbers, the process of receiving a check worth millions of dollars is surprisingly less scientific. In 2023, at least 5% of all startups in the United States were founded by women, yet they receive only about 1.8% of venture capital funding. The result is a rather unregulated system, one that involves networking and intuition. While women founders have made significant gains in the last 10 years, funding distribution still hasn’t achieved parity.

The gender gap in VC funding
Venture capital is a male-dominated field, allowing unconscious bias to negatively affect women founders. Funding for women-led startups has dropped off since reaching a high of $64.5 billion in 2021. While first-time financing for men dipped between 2016 and 2021, the recipients that benefited were largely companies founded by a mix of genders rather than all-women founders.
As women-led startups continue to grow and develop, they are less likely to receive late-stage funding when compared with earlier funding stages. Late-stage funding rounds often involve large amounts of capital in the $100 million range and allow companies to scale. In some cases, these companies may even go public on the stock market.

There are structural reasons for this disparity—a 2021 PitchBook study found that in the U.S., general partners who manage venture capital funds were 84.6% men, leading to less diversity among venture capitalists who are ultimately in charge of funding allocations. Because of this lack of diversity and the general inclination to invest in businesses that align with one’s experience or interests, there is also an unfounded sentiment that women-owned businesses are riskier investments, which may only merit funding during years of plenty. For example, in 2021, when there were ample budgets, funding to women-led companies was at a 10-year high. As the economy began to suffer and investors tightened their purse strings, funding to those companies fell.
Women-led startups also seem to be held to a higher standard that allows no mistakes to be made. Women get 22% less funding than male founders if a venture firm has had negative experiences with an unrelated woman-led startup in the past.

How much funding do female founders receive?
Even as women-led companies grow out of their first round, depleting capital, they have a difficult time continuing to raise money. Of all funding funneled into companies founded by women between 2014 and 2024, only 22% went to late-stage companies.
This disparity has little to do with the kinds of companies that are being founded. Compared to their male co-founders, women are 18% less likely to raise VC funding after a successful first venture and 30% less likely after a failed business.

This has many negative consequences for women-owned startups, the employees that work at them, and the existing investors taking a gamble to fund them. Without being able to cobble together extra capital, these companies cannot plan for the long-term, make their products better, and succeed in the market.
Trends are inching toward parity, however, and companies founded by only women have been starting to see more late-stage funding since 2019. In 2024, 28% of venture capital deals to women-founded companies went toward late-stage financing, a 10-year high. That same year, 34% of funding went toward nascent companies and another 34% went to early-stage companies.

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