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Study: Female-led startups are gaining more ground in venture capital race

Grete Suarez

Venture capitalists are increasingly gender aware when it comes to funding startups, a new study suggests, and female founders are reaping the rewards.

Last year, investment in startups with at least one female founder reached $46 billion, representing 18% of total VC funding — more than double the amount in 2017, according to a report from PitchBook and All Raise.

“We still have a lot of work to do, and to get to the place of parity, but the data really shows there’s been a huge amount of progress,” Jenny Abramson, founder & managing partner of Rethink Impact, told YFi PM this week.

And when it comes to predicting startup success, there’s one understated metric that plays a role. The study found startups with at least one female founder pockets has higher ‘exit’ potential— the moment when investors get their money back — than those with male-only founders.

In fact, female-led startups exit one year faster than their male-only counterparts and the exit value was at $26 billion by the end of 2018, according to PitchBook — up from $18 billion in 2017.

But even with proven data that women add leadership value and glowing returns on investments, the diversity gap is still evident. Abramson believes the same challenges female founders faced twenty years ago, still exist today. 

VC deal activity in companies with at least one female founder doubled last year compared to 2017.

The study found that only 11.2% of CEOs that scored VC deals were female. The investor side doesn’t get any better: Only 12% of decision makers in U.S. venture capital firms are women. Abramson told Yahoo Finance that the reason had a relatively simple explanation.

Startup funding, “especially at the early stages, is very much a pattern recognition business,” Abramson said.

“You see a pattern both on gender and ethnicity in terms of where dollars are going,” she added.

“You typically don’t have perfect financial data so you invest in people or entrepreneurs who remind you either or you, if you’ve been successful, or of other entrepreneurs you’ve invested in before,” Abramson said.

Even still, the PitchBook report shows a lot is changing.

Grete Suarez is producer at Yahoo Finance for YFi PM and The Ticker. Follow her on Twitter: @GreteSuarez

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