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Female founders see higher deal participation, but funding lags

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Note: This is part two of the three-part series on the 2023 State of Australian Startup Funding report, a collaboration between Cut Through and Folklore Ventures.

Overall outcomes for female founders continue to lag behind desired levels within the ecosystem, but there are some positive indicators.

In 2023, participation in deals by all-female or mixed-gender teams reached a five-year high, and the share of total capital raised also rebounded from the low levels of 2022, although it still fell short of 2020 and 2021 figures. The majority of these improvements were seen among mixed-gender teams.

Deal participation and funding shares for teams with at least one female founder improved across all investment stages, though stronger outcomes still prevail at the earliest stages. Industry participants are optimistic that the current increase in early-stage shares will eventually translate into higher shares in later stages, but for now, it remains a hope.

Seed deals involving female founders rose to 25% (from 22% in 2022), while Series A deals increased to 22% (from 16% in 2022). Series B+ deals involving female founders climbed to 20% (from 14% in 2022).

Despite progress in gender diversity at the top of the investment funnel, gender discrimination issues persist within investment committees. Alan Jones, General Partner at M8 Ventures, emphasizes the investability of female founders and calls on venture fund managers to confront their unconscious gender biases.

“How we report on mixed-gender founding teams needs to be critically examined. A company is considered female-founded if it ‘has at least one female founder in the mix,’ but on the cap table, that can look like three or more male co-founders with substantially higher equity versus the individual female co-founder with less than 10%. This blurring of lines and stark equity disparity compound the unethical issues in our startup ecosystem when we then look at the overall data — and it allows reporting to skew in favor of VCs being seen as doing a good job on the funding gap,” said Doone Roisin, Founder & Host of Female Startup Club.

Michael Batko, Chief Executive Officer of Startmate, commented: “The stats on funding of women founders are devastatingly low and easily discouraging, both as a founder and as an investor. It is important to keep creating a welcoming environment for women, not just waiting for the opportunity to invest, but all the way from the beginning — to encourage women to safely join the startup industry, build companies, and widen the funnel. There is no quick fix, but a long journey that all of us have a responsibility to be part of.”

“Our industry is brimming with extremely talented and generous women who are building, mentoring, and investing across the Australian startup ecosystem. The evidence suggests that investing in women founders and diverse teams delivers stronger returns for investors and better economic outcomes for our nation. It’s time to turn goodwill into action and take practical steps to break down the systemic inequalities women face in securing the capital they need to start and, importantly, to grow the next generation of successful Australian startups,” said Jess Baird Walsh, Venture Partnering at KPMG Futures.

The third annual The State of Australian Startup Funding Report is by Cut Through Venture and Folklore Ventures.

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