Why is global VC funding for women on the decline?

Women were already losing out on private equity funding well before the pandemic. So why is this and what needs to change?

By Anna Codrea-Rado

25 May 2021

aroline Newte Hardie had spent 18 months raising funding for her multipurpose, family-friendly venue when COVID ground plans to a halt. Not only was the launch of Peace + Riot delayed because of lockdown, even worse, her key investors pulled out.

“The pandemic hit. I lost funding and I had to start raising again, this time in a pandemic,” she says.

Newte Hardie picked herself up and started pitching again. All seemed well and she was ready to move forward when one of her most significant investors said he would not invest unless she could raise another £30,000 before signing the lease.

“We were due to sign next month,” she says.

She had one month to raise £30,000 or lose everything she had worked towards for two years.

“But this time, instead of bracing myself for pitch after pitch to an angel investor with little or no experience of being a parent, I decided I would pitch to my peers,” she says.

In 30 days, Newte Hardie raised £30,000 from women who had never invested before.

“We went from one female investor (out of five) to 24 female investors in 30 days,” she says.

Peace + Riot now has 27 female investors and the number continues to rise.

“When the norm changes, you don’t feel so pressured to follow the usual approach,” she adds.

Newte Hardie is one of countless female founders whose entrepreneurial plans were upended by the pandemic. As a hospitality offering with no tech component, the pandemic threatened to decimate her business altogether. But it also spurred her to change course and abandon the approach that had not been working for her up until that point – pitching for venture capital (VC) investment.

At a point when global VC funding to women-led businesses is at all-time low, the pandemic has put a harsh spotlight on the future of female entrepreneurship. And like Newte Hardie, many women are beginning to wonder whether the VC track is right for them.


In 2020, almost £213 billion ($300 billion) was spent globally on VC funding – an amount roughly the size of the Greek economy. The pandemic did not slow VC funding down – if anything, it presented a ripe opportunity for agile start-ups to take a leaf from page one of the Silicon Valley playbook: disrupt.

The pandemic turned everything from work, finance and education to fitness, healthcare and entertainment on its head. An overnight shift to online was a golden goose for companies in the cloud services and tech infrastructure space, leading the global VC market to close the year in a stronger position than it started.

While some start-ups did very well in 2020, others did not – and that was those helmed by women founders. In the UK, for every £1 of VC investment, all-women founder teams receive less than one penny, mixed-gender teams get 10 pence, and all-men founder teams get 89 pence, according to a report commissioned by former chancellor Philip Hammond.

The situation only got worse during the pandemic, with global VC funding to women-led businesses hitting a record low in 2020 when a mere 2.3% of global VC funding went to these businesses, according to Crunchbase figures.

“Ultimately, the pie for venture funding increased over the last year, but the slice going to female founders decreased,” says Pippa Lamb, partner at London-based VC firm Sweet Capital. (Full disclosure: Lamb is an investor in The Stack World)

Impact of the pandemic

So if the pandemic did not stall VC funding overall, only that going towards female founders, what happened?

For starters, working women have been disproportionately impacted by the pandemic and there is no doubt this also impacted on women founders. With care responsibilities, such as homeschooling, mainly falling to women, little time was left for entrepreneurial pursuits. Working mothers managed just one hour a day of uninterrupted work during lockdown compared to three hours for men, according to the Institute for Fiscal Studies.

Nicole Mason, President and Chief Executive Officer of think tank the Institute for Women’s Policy Research, called the impact a “shecession” and the International Monetary Fund (IMF) said progress for women has rolled back 30 years.

Beyond affecting the amount of work many women were able to do, there was also the fact that the industries worst hit by lockdowns happened to be those with a higher concentration of women. Businesses run by women more often experienced a reduction in trading volume during the pandemic (71.6% of women-run companies compared to 57.2% of companies run by men), according to King’s College London.

Founders like Newte Hardie, who operated in the hospitality sector, were among the hardest hit but retail, health and beauty, and the arts also suffered disproportionately and are all women-led sectors.

Within the start-up world, this made it even more challenging for women entrepreneurs to break through because they tend to found businesses in these sectors, too. After technology, which is the most funded industry across the board, women-led businesses tend to be concentrated in business services, leisure and entertainment and personal services, according to a report by Barclays.

The pandemic also stalled women entrepreneurship in more insidious ways. Findings from the Organisation for Economic Co-operation and Development (OECD) show that prior to the pandemic, many women founders used their own money to bootstrap their ventures. This made many women vulnerable to economic downturns. When it came to support, though, policy decisions and government intervention in 2020 did not take gender inequality into account.

The government’s flagship £1 billion support package for start-ups, the Future Fund, for instance, was intended to prevent the pandemic from stalling progress in the UK’s tech and entrepreneur space. The Treasury pledged £250 million in matched funding to high-growth companies, as well as £750 million in grants. Of the 252 companies approved for funding from the government, only three have all-women management teams, compared to 66 with teams led by men. The remaining 176 are mixed gender teams.

Critics, however, have pointed out that the data applies to the “senior management team”, rather than founders, meaning it is likely these figures are skewed.

Furthermore, to be eligible, companies needed to have raised more than £250,000 already, and have warm introductions to investors, both of which female founders are less likely to have.

“We must ensure that the lack of diversity in funded start-ups isn’t simply exacerbated by this new injection of funding – where start-ups are separated into the ‘haves’ and the ‘have nots’, and the ‘have nots’ are overwhelmingly the ones founded or led by diverse founders,” Francesca (Check) Warner, partner at Ada Ventures, wrote at the time in a blogpost.

Pre-pandemic, 2019 seemed to be an outstanding year for women-led start-ups. Overall funding was at an all-time high at £2.48 billion ($3.54 billion), as was the number of women-funded unicorns (billion-dollar companies).

More women were making partners at VC firms and exits were happening faster and at higher values. In comparison, the pandemic year that followed was a disaster. But many argue that 2020 was no anomaly – rather it was the straw that broke the camel’s back.

‘The pandemic put a microscope on the problem, amplifying and bringing it into focus – namely, that the odds are stacked against women at every stage of the VC funding process.’

It’s (not so) good to meet

A closer look at the figures shows that in almost all respects, progress in 2019 was glacial. Funding peaked, but the overall percentage of venture capital that went to female-led businesses was still a meagre 2.7% of total investment. The total dollar figure that went to female-founder companies was £.2.48 billion ($3.54 billion) (WeWork alone raised £3.5 billion ($5 billion) that same year).

Before the pandemic, Newte Hardie raised funding in the usual way: networking. And it exhausted her. Raising a round starts with a “warm intro”. Someone who knows someone introduces a founder to a partner at a VC firm.

“When people say ‘I’ve got a couple of leads’, it’s six or seven handshakes down the line before you meet someone that you pitch to,” Newte Hardie says.

That is how she once found herself in a marble-tiled members club for a second meeting with a potential investor.

“He’d brought along his junior investment guy, who turned out to be his son,” she says. “They only talked to each other and talked about how women don’t have a disposable income.”

When Newte Hardie tried to correct him, he told her that his wife “doesn't know how much I’ve got”.

“I honestly felt like it was sport to him,” she says. “It was just every stereotypical disaster.”

It was one of many negative experiences Newte Hardie had with VC funding that led her to abandon it altogether and seek an alternative.

Other founders have had similar experiences. Affi Parvizi-Wayne, founder of period care start-up Freda, says founder friends who were men would tell her about their experience of pitching, describing how they were encouraged and praised for their brilliant ideas, “whereas I was constantly having to justify why I was there”, she says.

The people to whom women founders have to “justify” themselves reveal where the industry’s blindspots lie. At VC firms with more than £17.5 million ($25 million) in assets, 88% of the decision-makers are men, according to All Raise, a US-based organisation accelerating the success of women founders and funders.

Furthermore, they tend to come from elite universities: a staggering 40% of investors at top US firms went to one of only two schools, Stanford or Harvard, according to a 2018 analysis.

Securing funding means getting investors to back not just your ideas but you as well. When those ideas are for products or services investors have no experience of, the mountain can become insurmountable.

For Parvizi-Wayne, this resulted in her conducting biology lessons in her pitch meetings for her period care company. One potential investor told her that her financial forecast was wrong because she had failed to take into account weekends and bank holidays.

“I had to explain to him that periods don’t stop over weekends,” she says.

Frustrated with fruitless pitch meetings, Parvizi-Wayne also decided to turn away from the VC funding route during the pandemic.

“I have stopped raising all together and I am concentrating on building my sales instead as it was so time-consuming,” she says.

As one woman founder, who wishes to remain anonymous, puts it: “The reality is that most investors are male, and many of the women I work with don’t want male VC energy in their business as they feel undermined.”

Zoom boom

On the face of it, virtual meetings seem to be a great solution for evening out the playing field for women founders, particularly mothers, who – as the pandemic showed – took on a bigger share of the caring responsibilities.

Lauren Currie, former CEO of leadership start-up Stride, saw it as a positive.

“Suddenly, it wasn’t about running around London to three or four meetings a day and being exhausted at the end of it,” she said. “I could sit on Zoom, have 10 conversations with funders in one day and not have to leave my house.”

However, emerging research shows that just as unconscious bias affects in-person meetings, they also play out in the virtual space too. A forthcoming study by Amy Bonomi and Finneran K. Muzzey from Michigan State University shows that unconscious bias in virtual settings is still very much present.

This chimes with existing research from the University of California Santa Barbara, which found that across the board, people are likely to “systematically discount the competence of female entrepreneurs and the investment-worthiness of their enterprises.”

Put simply, even over Zoom, differences still come across and can implicitly influence decision-making.

“I was the only person in those meetings with a regional accent,” Currie says. “I didn’t go to a Russell Group university or to a private school. I just don’t have those relationships. As much as I do have visibility and community as capital, which I built myself and I’m really proud of, I still felt that gap.”

The unilateral consensus is that the best way to address implicit gender biases is by having more women calling the shots. Women partners at VC firms, such as Lamb, are in the minority.

Only 13% of decision-makers at VC firms in the UK are women, while almost half of firms still don’t have a single female partner, according to the Rose Review of female entrepreneurship. The figures are similar in the US. According to All Raise, 27 new women joined VC firms in decision-making roles in 2020. That compares to 54 women who started such jobs in 2019. Of those 27 decision-makers, just one woman was Black; none identified as Latinx.

“The number one problem is that we need to have more representation in the decision-making level,” says Lamb. “That also extends to the people who are funding the venture capital funds – they should also be representative.”

An uncertain future

The data is not there yet to conclude whether the pandemic will lead to an uptick in female entrepreneurs seeking alternative funding options, but it seems very likely.

The trend has been bubbling for some time, and research even suggests that alternatives such as crowdfunding might be more favourable for women. A 2018 study from the University of Indiana found that women seeking financing for start-ups are perceived as more trustworthy by crowdfunding investors.

In some respects, the focus on the pandemic for the fall in global funding to women-led businesses can be a straw man. Rather, the pandemic put a microscope on the problem, amplifying and bringing it into focus – namely that the odds are stacked against women at every stage of the VC funding process, from who sits in the decision-making positions and how deals get made to what types of companies are backed.

VC funding has been failing women for years; the pandemic merely threw all of that into sharp relief. The worry now is what happens next.

All three founders interviewed say they are reconsidering their options after their experiences of raising funding in the past year.

Currie, who left her CEO role, is now going all-in on a previous venture Upfront, a platform that teaches confidence and public speaking to women.

Parvizi-Wayne says that Freda didn’t need investment after all because its cash flow was strong enough to sustain the business and she has now got her eyes set on the menopause market.

After her experiences of exploring a new avenue for funding, Newte Hardie isn’t sure what future investments will look like for Peace + Riot.

“We’re not yet ready for VC funding because we’re not yet about growth,” she says. “When the time comes, I will be thinking very carefully about whether the VC route is right for me or my business if the VC landscape still looks the same.”

Lead image: PhotoAlto / Alamy Stock Photo

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