The Clear Link Between VC Diversity And Success For Female Founders

Much of the coverage of Silicon Valley lately has focused on the gender gap in technology, and for good reason: The gap is growing, not shrinking, despite very public support of the issue by giants such as Intel.

Hiring practices are part of bridging this gap, but in an entrepreneur-driven industry, funding is another key part of the solution. According to Sahil Raina, assistant professor of finance at the University of Alberta School of Business, a deep-dive into the history of startup successes and failures reveals something of a surprise: The likelihood of female-led startups enjoying the same exit rates as that of male-led businesses is the same, but only when the female-led startup has been funded and guided by a VC with a female partner.

Why the Partner Matters

It’s worth pausing on how small the group being studied is. In a Harvard Business Review piece, Raina noted that women make up only 9% of entrepreneurs in venture-backed, high-growth tech startups. So the question isn’t only whether women get funded, but what happens after they do.

A venture capital firm doesn’t just write a cheque. A partner usually takes a board seat or works closely with the founders, helping with hiring, strategy, introductions and the next round of fundraising. If that relationship works less well for women founders, the effects can show up years later in whether the company is sold, goes public or quietly fails. That’s why the presence of a female partner, rather than the money alone, is the interesting part of Raina’s finding.

Advice From a Founder Who Lived It

This isn’t news to Karla Friede, CEO of Nvoicepay.com, who recommends that fellow women entrepreneurs look for VCs with female partners: “The men at these firms are probably more comfortable working alongside women and their expectations for women’s roles are likely different,” she says. But Friede points out that women can tip the balance in their favour through other tactics too:

• Make confident, not cautious statements in pitches
• Talk to VCs that already understand your niche
• Up the emotional connection by showing happy customers
• Show quantifiable results

Friede’s own company is a good example of where that path can lead. Nvoicepay, a Beaverton, Oregon, business payments company that Friede co-founded, was acquired by FLEETCOR Technologies in 2019. In other words, a female-led startup that reached exactly the kind of exit Raina’s research measures.

A Growing Support Network

The good news is that despite the ongoing gender gap problem, there are more supports for women-led tech companies than ever. “Nearly every week, there seems to be a new fund, a new network of innovative women, a new effort convening smart people to bring the venture world much needed diversity of thought,” says Joshua Henderson, an outspoken champion of women in the tech world. He has identified over 100 VCs, networks, and dedicated programs that exist specifically to help women entrepreneurs succeed.

How Much Has Changed Since 2017

On the investor side, there’s been real progress. In 2024, Bloomberg reported that about 18% of decision makers at US venture capital firms were women, roughly double the share in 2018. Groups like All Raise, which tracks the number, have made more women partners a central goal, on the same logic as Raina’s research: who sits at the table affects who gets backed and how they’re supported.

On the founder side, the picture has barely moved. PitchBook data reported by TechCrunch in July 2024 showed that startups with all-women founding teams hadn’t raised more than 3% of US venture funding in any year since at least 2014, and had taken about 2% a year over the previous four years, even when overall venture investment hit record highs.

PitchBook’s lead venture analyst, Kyle Stanford, told TechCrunch that “investment in women and diverse founders is also challenged by the current political climate.” Teams with at least one female founder do much better, but companies founded only by women still get a very small slice of the money.

What It Means for Women Founders

The research and the data point in the same direction. When choosing investors, look at who the partners are, not just at the size of the fund. A firm with women in decision-making roles may offer a better working relationship after the deal closes, which is when much of a startup’s success is decided.

Friede’s tactics still apply too: pitch with confidence, target investors who already know your market, and lead with results and real customers. And with more women now in partner roles than when this article was first written, it’s easier to find those firms than it used to be.