More than a quarter of the 413 reported startup funding rounds last year involved at least one female founder, skewed by participation in early-stage rounds while the median deal size remained well behind all-male teams.
This backward movement in deal size is disproportionately down compared to all-male founded startups, and comes amidst above-normal numbers for women-led startups in mega deals worth $50 million or more.
Prepared by Cut Through Venture and Folklore Ventures, the State of Australian Startup Funding Report 2023 shows 26 per cent of deals included at least one female founder, compared to 18 per cent the year prior.
Meanwhile, such startups accounted for 18 per cent of the total capital invested in 2023, representing a rebound from a precipitous fall from 20 to 10 per cent in 2022.
Larger deals for Loam Bio, Secure Code Warrior, Fleet Space Technologies and Silicon Quantum Computing accounted for $278 million of the total $610 million raised by female-led startups last year, with the median deal size overall sitting at $1 million for mixed-gender founding teams and around $700,000 for all-female led startups.
The latter represented just 4 per cent of all startup deals in Australia, but that was still double the 2022 level.
The median deal size for all-male founding teams was $3 million, representing a 50 per cent decline on 2022 while the median level for startups with at least one female founder dropped by 63 per cent.
"Promoting diversity alone does not make an ecosystem of inclusion and equity. As an industry, we ask founders and investors to be bold and think differently – yet too often we ourselves fall short," M8 Ventures general partner Emily Rich wrote within the State of the Gender Equity Gap section of the report.
"Bolder actors and actions are needed. Choose to work with and invest in people who don’t look like you and don’t think like you.
"Lean into the discomfort as breaking down barriers is just the first step. We must establish a systematic and business-led approach to opening doors and leaving them open."
Lucy Work, co-founder of sexual wellness and education company Normal and career accelerating skills initiative Fuzzy, wrote that we all need to "keep being hard on our biases when it comes to which founders get the 'benefit of the doubt' in fundraising conversations".
"Many investors pride themselves on the strength of their 'sixth sense' for great founders, but if that 'tingle in the gut' is pattern-matching to the style and characteristics of founders you've seen before, you'll keep picking the same winners (and losers)," she wrote.
"The data tells us this happens in practice too - for example, on gender, where female founders are asked more preventative questions while male founders are asked more promotional ones."
Australia's top raises in 2023 for startups with at least one female founder
- Loam Bio ($105m)
- Secure Code Warrior ($73m)
- Silicon Quantum Computing ($50m)
- Fleet Space Technologies ($50m)
- Constantinople ($32m)
- Rich Data Corporation ($28m)
- SpeeDx ($26m)
- Lyka Pet Food ($25)
- Eden Brew ($24m)
- Rumin8 ($12m)
- SwarmFarm Robotics ($12m)
- Planet Protector Packaging ($12m)
- Cauldron ($11m)
- Goterra ($10m)
- Paypa Plane ($10m)
- MadeComfy ($10m)
ALIAVIA Ventures founder and managing partner Marisa Warren said that despite evidence that female founders deliver on average 35 per cent higher return on investment (ROI) than all-male founded teams, the gender funding gap was continuing to widen and track backwards.
"We need to see real change in the industry starting at the VC firm level," she said.
"To-date ALIAVIA Ventures is one of only two VC firms with an investment mandate to back early-stage female tech founders in Australia, and we are based in California."
Nicola Hazell, founder and CEO of The Sunshine Effect, noted that in a tight investment market women faced even greater obstacles to growth, as in these times people tend to retreat to what is familiar, thus exacerbating both the impact of affinity bias on women and the tendency of investors to assess women based on risk, while men are assessed on potential.
"These barriers do not exist in isolation, but as compounding factors women founders endure throughout their startup journey, resulting in high levels of fatigue, disillusionment and burnout," Hazell said.
"The barriers play out most acutely in what is best described as ‘moments that matter’; those moments that can make a woman question her decision to launch a startup, make it unsafe or untenable to raise capital, or make it so much harder to lead and successfully scale a company.
"It’s no surprise the funding gap gets even wider for later-stage companies, given the hurdles women must overcome from day one to raise any capital at all."
Tracey Warren, CEO and co-founder of F5 Collective, also proposed several factors to consider in lifting progress, from advocacy and awareness to data-driven decisions to combat biases to specific gender lens investing.
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