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Study reveals alarming gender disparity in Australian startup VC funding

News • 5th Apr 2024 • 3 Min Read

Study reveals alarming gender disparity in Australian startup VC funding

DiversityBusiness

Author: People Matters Editorial Team People Matters Editorial Team
981 Reads
Women founders receive merely 3.9% of VC funding, hindering entrepreneurial progress.

Women founders are not being given the same level of financial support as their male counterparts, accounting for only 3.9% of venture capital (VC) funding for Australian student startups, a new study says.

VC fund NextGen Ventures recently published a report on funding for student startups. The company, which is the first of its kind in Australia to be student-led, revealed that only a fraction of VC funding is given to startups led by women founders.

Since 2012, over AU$1.2bn have been raised by student-founded startups, including Australian-American software company Atlassian.

However, only 3.9% of the money raised supposedly went to startups with women founders over the course of 10 years. Meanwhile, startups with mixed-gender leadership only received 1.8% of the VC funds.

By comparison, 94.3% of the total amount of money went to student startups led by all-male founders.

Competing for VC funding

Despite the wide discrepancy in financial support between female and male-led student startups, some experts consider the figures a noticeable improvement compared to recent years.

Before 2018, 100% of money raised through venture capital funding went exclusively to student startups with all-male founders.

An exploration of figures from FY 22-23 suggest that women founders received the smallest amount of VC funding for their student startups since 2017. These companies were only given AUD 600,000 of VC funds. Male-founded startups, on the other hand, received as much as AUD 1.2 million.

Even mixed gender-led student startups took home a slightly larger amount of VC funds (AUD 900,000) compared to women-led companies.

Startups with women founders received their highest funding in 2019 (10%) and 2020 (25%), with Manuri Gunawardena’s HealthMatch leading the way.

However, VC funding for both women-led and mixed gender-led student startups dropped to just 3% by 2021.

Unfortunately, the authors of the study say there is not much improvement in the situation of women-led startups.

Data and analytics platform Xylo is the only women-led startup out of a total of 14 that were founded during the previous financial year. Meanwhile, only three of the 14 startups had at least one woman in their founding team. The rest of the new student startups had all-male founding teams.

The University of New South Wales had the highest number of students receiving VC funding with 24%. However, of the 21 student startups that came from UNSW, only two companies were led by women founders.

The NextGen Ventures report underscores the gap between VC funding support between male and female-led startups in Australia.

A separate analysis by the State of Australian Start-up Funding Report in 2023 revealed that women-led companies only received 4% of the AUD 3.5 billion in startup funding in the country. A sizeable chunk of the funding went to startup with all-male founders.

Not enough financial support for women-led businesses

In December, TechCrunch reported the vast difference between venture capital funding for male and female-led startups in Australia. The article showed that only 3% of VC funds went to companies with women founders, while 10% went to companies with at least one woman founder.

VC funding for startups is also seeing a downward trend, especially involving companies with women in their leadership teams. In 2020, startups with at least one woman founder received 25% of VC funding. However, this figure dropped to 21% by 2021.

As bad as things already are, Black women and women of color founders apparently receive far less VC funding compared to their peers. They received only 0.03% of all the VC funds raised in Australia in 2021, according to consulting firm Creative Co-Operative.

If the situation does not improve, women business leaders are worried that it might discourage others from founding their own companies.

Read More

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