Even earlier, in 2015, First Round Capital, a prominent US VC firm with over $1 billion under management, reported that companies with a female founder performed 63% better than those with all-male founding teams. The firm that backed major successes like Square [$4 billion], Ring [$1 billion], and Uber [$154 billion], is coming out saying startups with at least one female founder are a better bet.

No change in over a decade

And yet, despite this evidence, little has changed.

In 2023, the British Business Bank (BBB) released an analysis of VC investments in the UK, revealing no improvement in the share of venture capital investment going to female founder teams over the past decade! Their top finding was that all-female founder teams still received only 2% of total equity funding, a trend mirrored across the EU and the US. For women from underrepresented ethnicities, the numbers are even lower, ranging from 0.2% to 0.6% of all VC funding.

However, there is some positive news. The number of diverse teams receiving funding is increasing, with about 10% of VC money now going to teams with at least one female founder. Additionally, startups exclusively founded by women have seen an increase in deal share, now representing around 5% of all VC deals in both Europe and the US (up from 2.7% in Europe and 3.8% in US in 2008).

Despite these slight improvements, the reality remains stark: after 16 years of research, discussions, and actions, startups founded by all- women teams still represent only 5% of total deals and approximately 2% of funding.

This raises a critical question: if the issue has been recognised and addressed for so long, why hasn't there been significant change?

The solutions from the past hinder the pace of change

The answer people refer to is usually one of the ones below, depending on which side of the story you are on:

1. VC investors are biased against women
2. There aren’t enough female led startups who know how to build startups

These two points have driven much of the global effort over the last decade, but in my opinion the approach has been flawed.

On bias:

The bias against female founders is well-documented. A 2017 HBR article by Dana Kanze and Laura Huang revealed male and female entrepreneurs get asked different questions by VCs and it affects how much funding they get and this is from both male and female VCs.

Since then, various initiatives like Diversity VC’s Standard and the BBB’s ‘Investing in Women Code’ have been introduced. And last year BBB also came out with a report ‘Finding What Works: Pathways to Improve Diversity in Venture Capital Investment.’ The solution is straightforward: the more women in decision-making positions at VC funds, the faster we will achieve diversity.

We’ve known the answer for a while now, the challenge is the VC business model inherently disincentives General Partners (GPs) to add more partners.

Most VC funds are run as a partnership, adding a new partner means sharing the fees and the carry, and not many people are willing to do that. So becoming an equal carry partner takes a lot of time, roughly 7-10 years, so you can’t change an industry fast especially as mid-level diverse professionals leave the industry.

On the lack of knowledge female-led startups:

Corporations and organisations across the globe have been funding accelerators and programmes for women entrepreneurs, driving office hours, mentorship and advice. Female founders received so much advice (mostly from people who never started a company), that if they would get $1 for every piece of advice they were told, they would not need to raise external capital for the next five years.

But you know what they didn’t get?

Money!

Now don’t get me wrong, I’m not saying female focused accelerators, mentorship, and office hours should be thrown out. There are enough systemic challenges to evidence that this support is needed and helpful. What I’m saying is that's not enough and should not be the focus. Money should be first, and advice/support is second.

Female founders need capital to build and scale their companies, and no amount of advice can replace the financial resources required. The focus should shift from advice to funding, with support playing a secondary role.

The main reasons we haven’t seen a meaningful change in over a decade in funding for female founders is that we focused on the wrong things: advice and support instead of capital and senior positions in a VC model that inherently is against change and takes decades to adapt.

So, how can we make a difference? How do we increase the percentage of VC-backed women (co-)founded startups from ~12% to 50%?

The investing truth we don’t talk about

People assume investing is all about data and the business model or the vision but there is one thing that we don't know enough about that is true for every investor out there and especially for anyone doing early-stage investment (Pre-seed to Series-A).

Investing is inherently biased! We invest in people we like and we can connect with!

As an early-stage investor, if you see five founders with good startups in one week, you need to prioritise your time and won’t meet all of them again, so you look at traction and vision, but also naturally, who you had rapport with.

Nature built us with a very simple feature: we connect faster and better to people who look like us and come from similar backgrounds. We share experiences, ideas, and stories so we bond. Hence, I’m more open to hear your ideas and am more positively inclined to see problems as challenges.

So if 85% of VC investors are white men, they will naturally connect easier to other white men. There is nothing malicious about this. (Not to diminish the fact we have a big misogyny and sexual harassment problem in the industry.)

The solution comes from diversity and decentralisation

In my opinion the best approach is not to focus on the wrongs of the system rather to build a global diverse investor base that can connect and build rapport with a broader range of entrepreneurs.

That’s what Alma Angels is all about!

Alma’s mission is “To generate $1 trillion in women led wealth by 2050.” We empower angels to become smarter investors, provide them access to exceptional deal flow, and help them build conviction and confidence in their ability as angels.

The average VC tends to invest in 8–10 startups a year. An average syndicate does anything between 5–10 deals a year. In my opinion that’s not good enough to make the change we want to see.

At Alma our community invests on average in 50 startups a year, all with at least one female founder.

Since we started in 2019, we have brought together and trained over 450 angel investors (75% of them women) who have invested £7.5 million into 200+ women (co)founders building tech or IP-rich ventures with global ambitions. These companies have gone on to raise more than £200 million to date.

Our goal is to build a global diverse community of 10,000 Alma Angels investing into 1,000 women founders every year.

That’s how you make a difference: get more diverse people to back diverse teams, don’t focus on building one fund focused on women, but empower a movement, creating a wave that cannot be ignored. When 50% of the best startups VCs have a woman (co)founder, we will get the access, and VCs will invest.

How can you make a difference?

If you work for a corporate/organisation with DEI initiatives that don’t include actual investment or capital provision, challenge that and push for evolution.

If you can, start angel investing and put your money where your convictions are. There are great organisations supporting women founders you can join, like Angel Academe, Sie Ventures, Hermesa, and of course, Alma Angels.