Women have long been woefully underrepresented in the venture capital world —and it could get a lot worse in an environment where the legal status of diversity initiatives remains uncertain.
Statistics show that venture capital firms founded by women have higher annualized returns than those whose founders are all men. But women’s share of deal value keeps falling, nonetheless.
Last year deal activity for all-women founded VC firms was valued at $3.7 billion, compared with $154 billion for those founded by men, according to PitchBook’s annual report on the subject. Women-founded firms were involved in 816 deals, compared with 9,340 for those started by men.
The number of deals also declined for the third year in a row, marking the lowest level since 2018. “Overall, female founders took home a smaller share of total U.S. VC funding for the year in terms of both deal count and value,” PitchBook said.
At the same time, over the past ten years female-founded companies had an average compound annual growth rate of 5.5 percent compared with 1.1 percent for companies started by men, it said. The burn rate for women-founded companies is also lower than for all venture-backed companies.
PitchBook sounded a note of alarm about the future.
“President Donald Trump’s executive order to end DEI initiatives and related ongoing legal battles will take some time to settle and be reflected in funding figures,” according to PitchBook. “It is notable that the entry points for underrepresented founders may narrow again in the face of new challenges, at least until legal precedent is decided.”
Leadership at public pension plans and endowments can continue to push back and demand managers that make diversity a priority for the investment firms themselves and the companies they back.
The VC world was dragged into the diversity controversy in 2023 when the same activist group behind the Supreme Court decision to strike down affirmative action at Harvard University filed a race discrimination claim against the Fearless Fund, a venture capital firm co-founded by two Black women, Simone and Ayana Parsons, and which gave grants to Black women entrepreneurs.
Last year, after a federal appellate court ruled that the activist group had standing to sue, Fearless Fund settled with the plaintiffs and agreed to end the program. That case dealt only with race, but lawyers at Cooley suggested that “corporate DEI programs that contain race-based (and potentially other) exclusions are vulnerable to legal challenge.”
The news for women in VC is mixed. VC firms that have at least one female founder raised $38.8 billion in 2024, which was an increase of 27 percent over the prior year. That money went to a smaller number of companies, however, as the number of transactions fell by 13.1 percent. Meanwhile, the all-male category saw a higher 33.2 percent growth in deal value.
Funding grew for later-stage companies and those operating in select software and healthcare subsectors, according to PitchBook. And 13 companies with at least one female founder crossed the coveted $1 billion valuation threshold to become unicorns. These founders also secured a record 24.3 percent of total U.S. VC exits, which PitchBook called “a positive signal particularly for investors who work with these founders.”
The unicorns financed by these firms include Anthropic, at $19.4 billion; Scale AI, at $14 billion; Deel, which develops online HR programs, at $12.1 billion; Talkdesk, a call center software company, at $10.4 billion; and Flexport, a supply chain logistics platform, at $8 billion.
