Funding levels drop for women founders

Funding levels for women founders dropped last year to the lowest in five years

What you probably already know: It’s not news that female founders are getting a fraction of the venture capital that’s being invested in startups in the U.S. But what is new is that the fraction is getting smaller. New data out from Pitchbook shows that companies with female founders last year received the smallest share of venture funds in the last five years — down 1.9 percentage points to 22.7%. Some have suggested that this is related to the massive deals in the artificial intelligence space, where many companies are led by men. But not everyone thinks the answer is that simple.

Why? “I really don’t think saying AI is a male dominated space makes sense,” said Grin Lord, founder and CEO of Mpathic, a startup using AI monitoring of clinical trials and medical conversations to promote safety and success. Rather, Lord says, there are many women in the AI space. They just might be first-time founders or not as well known as some of their male colleagues, and thus it can be harder for them to get funding. “I attended a women AI founders pitch event at the AWS conference last year and there were 50 or 60 founders at the pre-seed or seed stage attending,” Lord said. “It didn’t feel like we were scraping the bottom of the barrel, either.”

What it means: “Almost every company in my portfolio has some form of AI … in their core technology and all of them are founded by women,” said Martina Welkhoff, the managing partner for Goldenrod Ventures, a Seattle venture capital firm. “I think the bigger issue at play is the overall consolidation of venture capital into a small group of very large firms and funding drying up for new entrants.” When markets consolidate, entrenched incumbents can tend to be pretty homogenous, largely male groups, Welkhoff said, which, in an industry that relies on pattern-matching to make investment decisions, can lead to more male founders getting funding. 

What happens now? Some of what happens to women founders who do get a chance to pitch to investors can be chalked up to old-fashioned sexism. “I talked to another woman founder who got a copy of the investors talking about her after she left a pitch, and most of the conversation was about the fact that she had a scrunchie on her wrist, so they didn’t take her seriously,” Lord said. “In some ways, it hasn’t progressed. We’re in a weird time right now.” But Lord doesn’t want women in AI to lose hope. Mpathic successfully raised a seed fund several years ago, and Lord has some advice for others headed down the same path: “One advantage female founders have that I’ve observed is that we are more honest in general and more authentic,” she said. That has become a huge advantage in AI, where the market is saturated with people trying to make a quick buck. Still, you should prepare yourself for the reality of the world you’re entering. “This,” Lord said, “isn’t a space where you should expect radical feminist change.”