2022 Review of Funding for Female Founders
Female founders prove resilience in a tough market
2022 was a year of recalibration in the venture capital market as VC activity declined from 2021’s all-time highs. Geopolitical conflicts, rising interest rates, sky-high inflation, and strained supply chains all contributed to uncertainty in the market which caused many investors to pause and exercise more conservative investment practices. As a result, overall venture funding in the US declined by 37% compared to 2021.
However, female founders have proven to be resilient in navigating this tough macroeconomic environment, and have not been disproportionately impacted by the market downturn. In fact, female founders only saw a 28% decrease in US venture funding compared to the 37% average. As Women’s History Month comes to a close, Female Founders Fund is back with our Annual Review of Funding for Female Founders — see below for our key findings from 2022.
Key Stats
Starting with overall funding, 2022 was the second-highest year ever for overall VC investment with $209.4B in capital deployed in the US alone. This was also true for female founders who still raised significantly more than in any year prior to 2021.
According to Pitchbook, companies with at least one female founder represented over 18.4% of all capital deployed or $42.6B (a 28% YoY decline when compared to 2021). These companies also represented 25.5% of the total VC deal count in the US or 4,115 deals. Yet, 2022’s total capital deployed to female founders was still 74% higher than in 2020 which saw $24.5B invested across 3,247 deals.
When broken out into mixed-gender co-founders and all-female founders, teams with both male and female founders raised 16.3% of all capital deployed (an increase from 15% in 2021), while female-only founding teams received just 2.1% of total capital deployed (a decline from 2.4% in 2021). Over the past 15 years, this proportion has never surpassed 3%.
When looking at the sector trends for female founders across all stages, top industries continue to be software, pharma and biotech, healthcare and wellness (services), and B2B services, which represented 70% of all capital raised. Compared to 2021, B2B services and software companies made up a larger share of 2022 capital deployed, while the amount of capital going to healthcare, pharma, and biotech companies declined. Consumer retail funding, a sector that has been dominated by female founders over the past few years, declined by more than 50% YoY. Healthcare, another strong trend we saw in 2021, also fell by 48% YoY.
Seed Funding
Despite the increased difficulty of raising capital, early-stage funding was the least impacted by 2022’s downturn.
In 2022, there were approximately 4,465 seed deals in the US resulting in $13.7B of funding.
From our analysis of Crunchbase data, we found that female founders received $965M or 14% of seed funding with an average round size of $3.3M, compared to $3.95M for male founders.
New York and the Bay Area remained the top two destinations for female-led companies to raise Seed rounds with 35% of all capital coming from those regions. In 2022, New York continued to surpass SF in seed rounds led by women with 16.3% of seed round deals, compared to the Bay Area’s 13.4%. In particular, over the past few years, New York has emerged as a far more female-founder-friendly city given the diversity of industry and perspective. This is reflected in both capital raised as well as female-founded exits.
Series A Funding
2022 saw an increase in round size for female founders while deal count remained steady. From our analysis of Crunchbase data, we found that the average Series A funding round in the US for 2022 was $20.8M, which represents a 20% decline from the peak of $25.6M seen in 2021. However, despite this decline, the 2022 average remains above the 2020 average of $16M. However, for female founders, the average Series A round size actually increased slightly to $14.8M compared to $14.2M in 2021 (versus $9.2M in 2020). Despite larger round sizes, in 2022 female founders still raised 29% less than their male counterparts.
Of the 227 Series A rounds led by female founders, 51% of deals came from New York or the Bay Area, with 39 rounds in New York and 78 in the Bay Area with the rest split throughout LA, Boston, Texas and smaller cities. Compared to 2021, we have seen the overall number of Series A rounds decrease in both cities as expected given the overall macro environment.
While the overall numbers may look bleak, it is important to note there has been consistent growth for female founders raising institutional capital at the Series A. When Female Founders Fund began publishing this report in 2013, there was 1 Series A round in New York, and 19 in the Bay Area. Fast forward to 2022, we have seen exponential growth, particularly in New York with 39 Series A rounds in New York, and 78 in the Bay Area.
Several industries dominated the majority of 2022 Series A rounds including biotech (Seismic Therapeutic), B2B software (Upflex), digital health (Levels, Oula Clinic), & AI (Althea). Looking forward we predict in 2023, a continuation of Series A rounds across these categories as well an increase in climate tech & AI based companies.
Finally, when looking at the racial makeup of Series A female founders, we found that white women-led companies represented 85% of companies and 87% of all capital raised.
Notable 2022 Series A rounds in both NY & SF include:
- PunchListUSA: a real estate platform that digitizes home inspection data for instant estimates and online ordering of home repair services raised $39M
- Levels: a software company that provides real-time feedback on how food affects your health raised $38M
- Hill House Home: a digital-first lifestyle brand that sells clothing and home items raised $20M
- Alethea: an AI technology company that detects and mitigates disinformation, misinformation, and social media manipulation raised $10M
- Joro (now Commons): an app that helps people track and reduce their carbon footprints raised $10M
- Clare: a direct-to-consumer paint brand reinventing the paint shopping experience raised $8M (black female-founded)
Burn Rate
In 2022, as raising equity became more difficult, founders waited longer to raise, resulting in the average time between VC rounds reaching a five-year high at every stage.
Over the course of 2022, the average time between a Seed and Series A round increased by 5 months to a total of 21 months, while the average time between Series A to Series B increased by 6 months to a total of 23 months. This trend is even more pronounced when looking at later-stage deals where the average time between Series C to Series D increased by 9 months for a total of 26 months.
As founders wait longer to raise rounds, managing both cash management and burn rate is crucial. Between 2020 and 2021, the median cash burn rate for startups nearly doubled, and although companies have now begun to shift focus to extending runway and reducing burn rates, 2022 cash burn is still ~2x higher than pre-2021 levels.
According to data from Pitchbook, female-founded companies have been able to maintain a lower burn rate compared to the overall market, utilizing 25% less capital per month. But if difficult economic conditions persist, female founders will need to focus even more on tactics to extend their runway. This is even more critical given the recent challenges with Silicon Valley Bank, as access to venture debt — which founders have historically used to extend runway instead of raising equity at reduced valuations — will be limited moving forward.
Unicorns
The pace of new unicorn companies has also slowed significantly as valuations have come down. Globally in 2022, only 332 companies joined the Pitchbook Unicorn Tracker compared
To 616 companies in 2021. These unicorns are valued at $597.6B and have raised over $69.9B cumulatively.
Of 2022’s 332 unicorns, in the US only 13 new unicorns were founded by women, significantly less than the 2021 count of female-led unicorns (83). For reference, when Female Founders Fund began reporting on this data in 2013, there were only 4 female-founded unicorns.
Additionally, in 2022, it took female-founded companies longer on average to reach unicorn status compared to 2021 (7.6 years compared to 6.4 years for all VC-backed companies). This is an increase of 1.8 years compared to 2021’s all-time low.
Notable US unicorns of 2022 include:
- Globalization Partners: a SaaS-based global employment platform led by Nicole Sahin has raised over $350M to date and is currently valued at $4.2B
- Veev: a developer of housing systems designed to reinvent the way homes are built and experienced, founded by Dafna Akiva, raised a $400M Series D at a $3.36B valuation
- Athelas: a developer of in-home technology to monitor chronically ill patients in their homes co-founded by Deepika Bodapati raised over $150M at a $1.56B valuation
- Upside Foods: a cultivated meat company intended to help firms produce real meat, poultry, and seafood without slaughtering animals led by Joanna Kochaniak raised a $400 M Series C at a $1.31B valuation
- Clipboard Health: a healthcare technology platform designed to provide healthcare staffing services in the form of nursing and allied health staff led by Wei Deng raised a $30 M Series C at a valuation of $1.3B
- Chief: a private network intended to connect and support women leaders, led by Carolyn Childers and Lindsay Kaplan raised a $100M Series B at a $1.1B valuation
- Stax: a developer of an integrated payment platform designed to simplify the overall payment experience for business owners led by Suneera Madhani raised $245M at a $1B valuation
- MinIO: an open-source distributed object storage software led by Garima Kapoor raised $103M at a $1B valuation
Exits & IPOs
Following 2021’s record year, the number of IPOs saw a steep decline with many pre-IPO companies pausing plans to go public as the market conditions made it challenging for later-stage companies to raise funding. According to Ernst & Young’s IPO report published in December 2022, IPOs in the US dropped 72% YoY, and IPO deal proceeds also plummeted 94% in 2022 from $155.8B to $8.6B.
Exit activity for female-founded companies in 2022 only reached $10.9 B across 172 exits — significantly lower than the $73.3B generated in 2021 and $31.4B in 2020. However, the proportion of total exit value for female-founded companies jumped from 9.5% in 2021 to 18.2% in 2022 YTD. Additionally, despite the difficult market, female founders are still exiting faster than the broader market with a median time to exit of 7.2 years (12.5% faster than the 8.1 years for all startups).
Notable 2022 exits include:
- Knix: a women’s intimate apparel brand for periods and incontinence founded by Joanna Griffiths, was acquired by Essity for $320M (the largest publicly disclosed private sales of a DTC company by a female founder)
- Tradesy: an online peer-to-peer resale marketplace for buying and selling women’s fashion founded by Tracy DiNunzio, was acquired by Vestiaire Collective for an undisclosed amount
- Barefoot Scientist: a premium foot care brand combining science-backed formulations with lifestyle-friendly product design founded by Dana Ward, was acquired by Japonesque for an undisclosed amount
Final Thoughts
While 2021 was a record-setting year for female entrepreneurs, 2022 has shown us that there is still more work to be done. A few key takeaways from our data:
Overall funding for female-led companies declined from 2.4% to 2.1% in 2022.
Female founders raised 18.4% of all US capital deployed in 2022 — a 28% decline from 2021, but still 74% higher than in 2020. The 28% YoY decrease in venture funding to female founders was also much lower than the 2022 average decline in venture funding of 37%.
Although Series A rounds overall fell YoY, female founders raised larger Series A rounds in 2022.
Female-founded companies have been able to maintain a lower burn rate, utilizing 25% less capital per month when compared to the overall market.
Finally, despite the difficult market, female founders are still exiting faster than the broader market with a median time to exit of 7.2 years (12.5% faster than the 8.1 years for all startups). We have seen this anecdotally in our own portfolio with an average exit period of 4.5 years.
In conclusion, we wanted to share a few recommendations from our investing team on how female entrepreneurs can continue to stay resilient in the face of challenging market conditions:
- Be disciplined and focus on the fundamentals: For the past few years, everyone (VCs included) has been moving at record speeds. Take a step back and reevaluate your business plan. What is your product roadmap and prioritization plan? How crisp is your go-to-market strategy? Good planning and execution will be key over the next few months and years as companies adapt to changing market needs.
- Focus on sustainable long-term growth: History has shown that the average US recession lasts for about 17 months. With the latest average time between a Seed to Series A round now at 21 months and the average time from Series A to Series B at 24 months, it is crucial to ensure that founders have ample runway to cover operations for at least 24 months. 29% of startups fail because they run out of money. Be cognizant of burn rates, unit economics, profitability, and sales cycles. Companies who make adjustments to scale more efficiently will have more options in later rounds, and significant dry powder waiting.
- Raise capital when you can: Don’t keep waiting for the market to rebound to 2021 levels; if you need capital, raise. Waiting too long, and running out of runway could put your business in a position of weakness instead of strength. If your business is strong with the potential to grow, VCs will invest. Yes, valuations are lowering, but there is still a significant amount of capital in the market ready and waiting to be deployed.
- Invest in your team: A few years ago, it was impossible to acquire talent. Now with the influx of former big tech professionals hitting the market, earlier-stage startups have access to a larger pool of experienced and extraordinary talent. Take advantage of the opportunity and go after stretch talent you never thought you could hire.
- Invest in your community: Entrepreneurship can be a lonely journey, especially for women. Remember to lean on family, friends, and other female founders who understand what you’re going through. In difficult times, our community can become our safety net; that’s why investing in community will always pay dividends.
Female Founders Fund launched in 2014 with a simple investment thesis: women will build the companies of tomorrow and we will back them. Since then, capital invested into women-founded companies has increased by more than 4x. Despite the headwinds of 2022, we remain optimistic about female founder’s ability to navigate and thrive in this market and beyond.
Big thanks to FFF’s MBA intern, Ashley Reid, for her hard work on this year’s report!
