Venture capital funding for women-led businesses has ended. But is it high enough?

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Funding for women-led businesses roughly doubled in 2021, according to Pitchbook. And that growth comes after almost no change between 2019 and 2020.

We spoke with Geri Kirilova, partner at Laconia Ventures, in a Twitter feed, to get its response to the data.

“Frankly, I was preparing for the data for 2021 to be worse than it is. So I guess things aren’t as bad as they could be? »Kirilova tweeted on the report. In particular, Kirilova noted the two different metrics available: the total dollars funding businesses run by women and the percentage of all dollars going to businesses run by women. Until we know more about the total dollars allocated to VCs in 2021, we won’t know whether relative funding for women was up, down, or about the same. “I think it’s critical to see where the total venture / growth capital of 2021 stands and how the growth in dollars of women (and other historically under-represented groups) compares,” he said. she declared. wrote.

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Any growth in funding for women-led businesses starts from a very weak base. Allocations to these firms have increased to about 3-4% of venture capital funding in recent years, well below parity. While no apple-to-apple comparison is yet available, if we compare the Pitchbook data with Crunchbase’s preliminary tally for global venture capital funding in 2021, there is a possibility that funding for women-led businesses will reach a double digit percentage this year, but it’s too early and the data sources are too disparate to have a strong signal. Even on the most optimistic reading of the data, however, venture capital funding for women-led businesses is likely to increase severalfold, if it is to come any closer.

With only ‘incremental’ progress on funding women and other founders of diverse backgrounds (black women had only received about one-third of 1% of funding in the second quarter), Kirilova wrote, “In an industry where timing is important, I’m afraid a lot of progress will be ‘too little, too late.’ We are not moving fast enough as an industry. “

Who will bear the brunt of the risks of CV being “too little, too late”? As Kirilova sees it, there are three groups that lose: founders who lose capital, customers who lose products or services that are not funded, and “returns of potential investors, both at the level of the venture capital fund. and the sponsor ”. Regarding the “current results of the funding”, Kirilova said, there are two conclusions available: either “the market is efficient by allocating 95 to 98 percent of [funds] to men, “or” something is wrong with the operation of this system and inefficiency results in losses every step of the way “for investors.

Kirilova blame “limited will” for the lack of diversification, because “how to solve this problem is no secret”. She noted four key stages: “diversifying decision-makers, standardizing processes, reducing insularity, [and] commit to generating results. “

A change in the past two years is an increase of various new funds or allocations specifically targeting women-led businesses. But some in the industry argue that having these specialized funds simply allows general fund executives to ignore women-led businesses.

“They don’t solve the systemic problem, but they certainly help get more [funds] in those [companies], “Kirilova wrote, describing the possibility of focusing on women-led businesses as an “arbitrage opportunity,” noting: “We will have made enough progress when these fund strategies are obsolete. I hope they gain a lot of money. money to help us do it. “

Kirilova closed by write about “The biggest opportunity we have,” she said, “is figuring out how to move more capital in the early stages, in a way that actually reflects the real potential.”

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