We’ve previously discussed the need for more women in the VC and investment space, as women investors are significantly more likely to invest in diverse-lead companies. So the natural next question is why aren’t there more women investors, and how can we try to change that?

We put this question informally to some friends of Founderland who work in the investment space, and interestingly enough, we got the response: ‘There are a lot of women investors, and we have seen more and more women entering investment firms – or investing personally – in recent years’. So we did some digging, and sure enough, the data shows that in the past years, there has been a significant increase in the number of women in investors – from individual trading to institutional investment

For instance, data from deGiro (a popular European trading platform) indicated that the number of female clients increased by over 25% between 2020 and 2022, and in 2023, female angel investors comprised 46.7% of the market, an uptick from 39.5%in 2022 and 33.6% in 2021. Generally, there’s a shift of wealth happening, too, and a 2022 report by UBS found that women now control nearly 32% of global wealth, up from 28% in 2016. This trend is more pronounced in emerging markets like India and China, where cultural shifts and economic empowerment programmes are driving more women to invest.

In VC, the area we’ll focus on for the rest of this article, we also see a positive shift in the gender dynamic of investment teams. However, there are still – from a pure numbers perspective – far fewer women in the VC space than there are men; in fact, in 2022 only about 15% of all VC ‘cheque-writers’ were women, and European Women in VC data shows that only 9% of assets under management are in the hands of female managers.

On top of this, a Sifted article from mid-2023 investigates an ‘exodus of women investors’ from ‘European VCs’, implying that there is a structural problem failing to keep women in the space, mitigating work being done to bring women into VC in the first place. “Investors and recruiters say the general outflow of female talent is likely linked to dissatisfaction with the male-dominated industry and the fact that many funds are slowing investing amid a more difficult funding environment.”

With this in mind, we want to take a look at what factors tend to hold women back from entering VC and what causes those who do enter the industry to leave.

Structural issues

Did you know that, overall, women outnumber men in the finance and banking industry? But, frustratingly, the reverse is true in the most senior positions; at the beginning of 2021, women accounted for about 52% of the industry, according to research by McKinsey, but their representation fell at every step up the corporate ladder. In the C-suite, white women accounted for only 23% of executives, and women of colour another 4%. The same trend extends to the VC-specific space (where women are still in the minority): Women represent a mere 21% of all venture capital employees, with the largest proportion (36%) of women in venture capital in junior-level positions, followed by 29% in mid-level positions and 11% in senior-level positions. Plus, according to a 2023 Atomico report, only 16% of General Partners (GPs) in European VC were women and only about 8-10% of VC decisions were taken by women.

Internalised biases

Additionally, male founders often hold inherent biases toward female investors, perceiving them as less competent or influential compared to male investors. Research shows that male founders are 60% less likely to pitch their business to female investors, which can contribute to women being sidelined in key decision-making moments within the industry.

An unnamed woman of colour partner at a VC, quoted in the aforementioned SIfted article, stated: “Despite working in VC for 8+ years and making it to partner level, I still notice that people take me less seriously than white male VCs.” She expanded, saying that founders have ignored her in meetings in favour of addressing more junior male colleagues, coworkers have asked her to do tasks usually done by interns, and visitors to the office have assumed she’s the office manager. This of course is incredibly frustrating and disheartening, and – over time – understandable can lead to a decision to leave the space.

Frustration with the VC space more generally

Women’s investment strategies tend – on average – to be less risk-averse and consider long-term financial and societal impact far more than their male counterparts. A Sifted article from 2024 investigating VC expectations found that there is currently a 10-year cycle mindset: “VCs typically raise funds that have a 10-year lifecycle: five years of investing, followed by five years of working with companies to create exits.” Within this time, and in a world affected by COVID, increased inflation and unstable economies, we can’t necessarily rely on the 10-year return cycle; and we are seeing more and more that the current model of VC is struggling right now. Given this, it’s therefore very interesting to know that nearly half of all angel investors are women (and there is a big surge in women backing startups at the early stages): “In 2023, female angel investors comprised 46.7 percent of the market, an uptick from 39.5 percent in 2022 and 33.6 percent in 2021”, a report by the University of New Hampshire’s Center for Venture Research found. We can – given this data – speculate that women feel more comfortable investing their own wealth into startups, and being able to act as an early-stage accelerator of growth.

Limited progression and alternative career paths

While we have seen an increase in funds over the past years, these funds are small, ultimately meaning progression can be slow and can only happen when more senior people step away. While more progressive and younger funds are working hard to have diversity within their teams, it makes sense that the larger, more established funds have gender balance issues: “It takes time — often 20 years or more — to rise to the ranks of fund manager, and the industry was even tougher for women in the 1980s and 1990s. To become a manager, you have to convince people that you can produce good returns and beat a benchmark. Basically, that means managing money, something that many analysts aren’t allowed to do, and certainly weren’t allowed to do in the 1980s.” Waiting around for someone to leave isn’t – understandably appealing – and we actually see many women leaving VC to found their own startups.

It’s not all doom and gloom; as we said, there are shifts happening in the VC space: most excitingly perhaps there are more women starting their own VC firms and raising capital themselves, which gives them the opportunity to break from the traditional venture mould and build firms that have different governance, structure and values.

Research by Venture Capital Journal found that: “Women-led VC firms raised roughly $3.5 billion last year, $500 million more than they raised in 2022 and without any $1 billion-plus funds, two of which were raised in 2022. The number of women-led funds that held partial or final closes grew to 86 from 36 the previous year. And a little over 3 percent of the $107 billion raised by venture funds worldwide in 2023 went to women-led VC firms, up from 1.9 percent of the $158 billion raised worldwide in 2022, according to our calculations.”

In writing this article, we also found several lists highlighting the top women-led VC, such as this one, which highlights women-led venture funds that focus on funding women entrepreneurs.

We can’t wait for these trailblazers to keep opening doors, and for the number of women in VC to become equal to the number of men.

GENDEX’s research team is diligently collecting and analysing data to demonstrate why investing in diverse founding teams has a better ROI. We’re eager to share their findings with you soon. For more updates, follow us on LinkedIn, subscribe to our newsletter, and check out our YouTube channel.

Written by Emily Hoffschmidt-McDonnell, researched by Sophie Webber .

See our references here