Total share of funding for women-led startups declined in 2022, but it’s not all bad news

Cut Through Venture and Folklore Ventures have released their second State Of Australian Startup Funding report. There was a lot to dig into in its 89 pages of findings, including a mixed landscape for women founders.

The report found that there was a 30% reduction in overall investment in 2022. However, Australia fared better than some other startup ecosystems and early-stage investment actually saw an uptick.

A mixed bag for women startup founders

When it came to investment into women-led startups, the numbers were mixed and highly in favour of early-stage raises.

On the plus side, deal participation for women founders hit record levels. In addition to this, it was greater than levels seen in the US.

“A significant uplift drove this deal share at the pre-seed stage to 33%,” the report said.

“Furthermore, women founder participation increased at the Seed (20%) ad Series A (19%) stages.”

On the flip side, later-stage raises seem to be more challenging. Additionally, the share of total capital that went to women founders declined in 2022.

It’s worth noting that some particularly big deals in 2021 contribute to that drop-off. Both Canva and Airwallex have women founders at the helm and had mammoth funding rounds that year.

In fact, Canva had two: $92.5 million and $273 million. Airwallex landed $276 million in September 2021. And while it also received a $159.6 million investment into its Series E in October 2022, this wasn’t enough to balance out the numbers from the previous year,

It’s also worth keeping in mind that there was a dip in funding across the board in 2022 due to the economic downturn.

And it wasn’t all bad news, as Taryn Williams, founder of theright.fit, points out.

“Seeing early-stage funding to women increase (33% up from 21%) is a really important stat, as without that early-stage capital these companies cannot get off the ground or get enough product market fit/proof to raise venture funds,” Williams said in an email to SmartCompany.

“The number of deals announced is pleasing too, as it’s a step in solving that pipeline problem. That shows there are more female founders getting access to capital, which I think highlights that the market is more mindful of backing female founders, but these founders are not (yet!) going to be at the series A, B, C stage with larger cheque sizes.”

“That said, from the stats, it’s concerning that perhaps there is more dialogue and attention being paid to this, but not enough actual capital deployed to them.”

More still needs to be done to diversify the Australian startup space

This doesn’t mean that there’s not more that can be done to support women-led businesses. The report also found women founders feel less supported and with fewer options than their male counterparts.

“Just 5% of women founders (versus 28% of men) believe there are many funding options available to founders, and 33% don’t feel supported by the startup ecosystem (versus 26% of men),” the report said.

“Moreover, 30% of male founders feel highly confident they’ll be able to raise again, as opposed to just 10% of women.”

So where does that leave us in 2023?

According to Blackbird VC, it is looking to invest in more founders with diverse backgrounds

“While it’s good to see deal participation for women in the Australian VC industry improved in 2022, it’s clear there is more to be done from the top of the funnel through to the investment decisions made across the ecosystem,” Alexandra Gifford, investments chief of staff at Blackbird, said in a message to SmartCompany.

“At Blackbird, we continued to invest in female founders in 2022. Our rate of investment in female founders has been improving across our funds, and several of the companies we invested in last year had all-female teams.

“However, this is something we are paying close attention to and are tracking across our investment pipeline. We recognise there’s still a lot to be done, particularly by VCs, and we’re also looking at programming and partnership opportunities to find and invest in founders from more diverse backgrounds.”

It’s not just about money

Main Sequence partner Gabrielle Munzer says that to see an improvement we need to also be fostering diversity earlier.

“Despite improvement, we’ve still got a long way to go in providing women in Australia with the opportunities to unlock their full potential. To improve the situation and create a fairer and more thriving, female-empowered startup ecosystem, we need to look at how we can help architect the pathway for more women to become founders of the next generation of valuable companies we are creating.” Munzer said in an email to SmartCompany.

“What this means is building diversity from day dot — it is far easier to build a diverse organisation from the ground up. In addition, from an investment perspective, we need to empower future female leaders at very early stages, engaging with potential founders when they are still in research roles, as coaches and mentors and holding office hours to provide advice to the deep tech community.”

Williams also agreed with this, saying these conversations need to keep happening so diverse investment stays top of mind for VCs, angels and founders.

“There needs to be more education and support for female founders to help them access capital successfully, and I think visibility and transparency to the breakdown of investments made help keep all parties in the ecosystem striving to do better.”