What female founders need to know about investment and fundraising trends

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Statistics suggest there has been a recent decline in the aggregate number of female startup founders. What’s behind it? We’ll explore the trend by diving into data around funding and valuation challenges, and looking at some industry-specific achievements and female founder success.

The FemTech market and the tumultuous years since the 2020 startup boom

In 2023, women accounted for 13.2% of newly incorporated startup founders — down from 15.1% in 2022 and seemingly the lowest percentage of female startup founders in the last several years. 

This downward trend has permeated many sectors in which female founders have traditionally been active, such as education, consumer, pharmaceutical and biotech and software as a service. Not all sectors are plagued by this same decline, as healthtech and medical devices have seen an increase in participation by female founders over that same period of time. 

One explanation for women’s disproportionate rise in the healthtech and medical device sectors could be attributed to the rise of “FemTech” as an industry focus. 

A niche industry focusing on women’s health issues, FemTech includes maternal and menstrual health, fertility, contraception and menopause, among other conditions that uniquely affect women. Over the last several years, the number of startups created to address the specific needs of this market has grown — between 2013 and 2023, the sector experienced a 1000% increase in the number of businesses in the space. 

Some argue we are in the midst of a “FemTech Revolution,” projecting the market value of the global FemTech industry to exceed $103 billion by 2030, while others are more cautious. The sector is growing, but some see it as only modest. 

While there has been a proliferation of startups, fundraising into this sector has remained disproportionately lower. Societal taboos and the so-called “ick” factor likely contribute to the hesitance shown by male venture capitalists, creating a hugely untapped and underfunded market. 

In 2023, only 1.4% of total capital investment went to FemTech. Even more staggering, until 2023, FemTech startups founded by all men raised more money per year than FemTech startups founded by all women (though they are fewer in number).

What about fundraising? Are female-led companies receiving the capital necessary to grow?

In 2018, Boston Consulting Group, in partnership with MassChallenge, released a study finding that female-founded startups received, on average, less than half the investment in male-founded startups — yet performed better over time, generating 10% more in aggregate revenue and a higher per dollar return on investment. 

A year later, BCG published another study finding that investing in women entrepreneurs at the same level as male entrepreneurs could boost global GDP by approximately 3% to 6%, adding $2.5 to $5 trillion to the global economy. 

Despite these findings, venture capital backing for female-founded startups has remained fairly stagnant over the last 16 years. In the first half of 2024, startups founded by women received only 2.2% of capital invested in all venture-backed startups in the United States, according to PitchBook. Since 2008, the average yearly percentage has hovered around that amount, peaking at 2.8% in 2009. Though subject to more volatility year over year, female/male co-founded startups have fared better in terms of amount invested, representing 14.8% of total capital invested in the first half of 2024.  

The rise of women investors, and what that means

In contrast to what appears to be a shrinking number of female founders, the number of female investors and venture capitalists is on the rise. 

And research has shown that venture capital funds with at least one female partner are several times more likely to invest in female startups than all-male funds. 

Harnessing the resources of female investors and the knowledge of female founders in the FemTech industry will help solve a multitude of problems in women’s healthcare, from barriers to access to discrimination and misrepresentation in medical research. 

While female investors remain a minority group, the growth of female representation on the investor side suggests there could be an increase in demand by those leading the search and executing deals for female-led startups, or startups tackling issues that have disproportionate effects on women.