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Gains in fundraising can’t shake off the losses for female and minority founders in 2021

Significant increases in funding during 2021 put even bigger checks into the pockets of all early-stage founders. However, relative fundraising outcomes remain unbalanced for diverse teams.

Last year’s investment totals in startups—which exceeded $600B—made 2021 a record-breaking year for VCs and founders alike. Significant increases in funding, fueled by intense deal competition among investors, put even bigger checks into the pockets of all early-stage founders.

At face value, these gains in fundraising appear promising for early-stage founders; however, research suggests not all teams are benefiting equally. When looking at 2021 fundraising data, we shouldn’t let absolute gains mask relative disparities among founding teams. The record-setting cash flows in 2021 translated into more money for founders across the board; however, relative fundraising outcomes remain unbalanced for diverse teams.

Though VCs spent similar time on all-female and all-male decks, all-male teams raised an average of 33% more money than females. Click To Tweet

The gains don’t erase the losses for underrepresented founders

The good news is that VC engagement with all-female and minority founding teams is up—a lot!—when compared to 2020. Investors met with more all-female and diverse teams in 2021 than the year prior, with all-female teams clinching the most VC meetings out of any other group. All-female teams with no minorities increased from an average of 35 meetings in 2020 to 42 meetings in 2021. All-female teams with minority members saw the biggest gains, jumping from 26 meetings in 2020 to 67 meetings in 2021, marking a year-over-year (YOY) funding increase of over 1000%. (Note: This was the biggest increase in engagement seen across all demographics.)



But does “engagement” actually equal strong fundraising outcomes for underrepresented founders? The disappointing news is that this increased VC attention at the earlier stages of the fundraising process didn’t always translate into more funding. While all-female teams raised more money in 2021 than in 2020, they still raised 25% less than their all-male peers. Adding race into the mix reveals larger disparities. All-white teams raised 36% more money than diverse teams in 2021, which is a stark reversal from 2020 when diverse teams raised nearly 40% more money than their non-diverse peers.

Data for all-female teams with minorities is even bleaker: All-female minority teams raised the least money out of all demographics, despite averaging 57% more meetings with VCs. They were the only demographic to average less than $1M per raise. When thinking about this ratio of meetings to the amount raised, I’m reminded of how Brooke Sinclair, CEO of Velourit, reacted to our data: these founders were simply stuck doing more work for less money.

The money raised doesn’t add up to the time spent

More gender and racial inequalities linger beneath the surface. For example, despite spending the least amount of time fundraising, all-male teams still raised the most money of all groups in 2021. When compared to all-female minority teams, who spent nearly the same amount of time fundraising, all-male teams raised twice the amount.

The relationship between time spent on pitch decks and total money raised also remained uneven among demographics. Though VCs spent about the same amount of time on all-female and all-male decks, all-male teams raised an average of 33% more money than females. The disparity for all-female teams widens further when comparing their pitch decks to those from mixed-gender teams. Despite both groups raising $1.5M in funding, investors spent 32% more time scrutinizing all-female decks. As outlined below, the time spent on the Team section may go a long way toward explaining these discrepancies.

Inconsistencies between the time investors spent on decks and total money raised remain between all-white and diverse teams as well. Investors spent 17% more time evaluating decks from all-white teams than those from diverse teams. VCs spent nearly four minutes reviewing decks from all-white teams and just over three minutes on those from diverse teams. All-white teams raised over 40% more money than teams with minorities, averaging $2.4M compared while minority teams raised $1.7M.

Different teams ≠ the same levels of VC scrutiny

The level of scrutiny VCs gave pitch decks also varied across demographics. In 2021, VCs spent 130% more time on the team sections for all-female decks than they did for all-male decks. In fact, the team slide was one of the least important slides in all-male pitch decks. They also spent significantly more time reviewing traction sections for all-female teams, averaging 76% more time than in all-male decks and 56% more time than in those from mixed-gender teams.



On the flip side, VCs spent 105% more time on the product sections in all-male decks than they did in all-female decks. The product section was one of the least scrutinized slides for all-female teams. And while VCs spent roughly the same time on the business model sections of all-male and mixed-gender teams, they spent 43% more time scrutinizing this section for all-female teams.

Bringing race into the equation reveals similar trends. Investors spent 20% more time on product sections in decks from minority teams and 67% more time on their market size sections. In contrast, VCs spent nearly 50% more time on the business model sections of all-white teams than they did on decks from diverse teams.



The largest discrepancy between all-white and diverse teams? The competition section. Here, VCs spent 78% more time scrutinizing the competition section for teams with minority members than those from all-white teams. For all-white teams, the only section to garner less attention than the competition slide was the company purpose.

Creating equitable outcomes for underrepresented founders

Even in a year with more available funding than ever, discrepancies like these reveal that diverse founders still face unique hurdles when raising capital. My hope for this research is that it adds to ongoing conversations about turning investor engagement into funding commitments and creating equitable outcomes for underrepresented founders.

2022 Funding Divide Report

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