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A deeper dive into company valuations: the case of female-founders

March 15, 2018
By: Robert Ksiazkiewicz

Valuations of venture backed companies and the number of unicorns are rising based on the leading nationwide surveys, but closer examination of the data reveals not all startups are seeing the effect. The median valuation for female-founded companies, for example, was lower in 2017 (approximately $11 million) than it was in 2007 (approximately $15 million), according to research from PitchBook’s Dana Olson. In comparison, the median valuation for male-founded startups has increased by approximately $8 million between 2007 (approximately $21 million) and 2017 (approximately $29 million). Olson also found that, across all industries, a much higher percentage of VC-backed, male-founded companies (35 percent) received at least one round of follow-on funding than female-founded companies (2 percent). With regard to exits, male-founded startups are acquired more than 11 percent of the time, while less than 0.5 percent of female-founded startups ever reach the same milestone. Male-founded companies also have a higher rate of IPO (nearly 1.7 percent) than female-founded startups (less than 1 percent).

In a follow-up article, Olson found mixed results that indicate female-founded startups may provide different, specific benefits to investors when compared with their male-founded peers. Olson conducted research on investor returns and time to exit to see if there was any difference between female-founded and male-founded startups. The review of the new data found that:

  • In 2017, the median OIC (multiple on invested capital, defined as exit value/total VC raised) for all-female founding teams was 18x, versus 5x for all-male founding teams; and,
  • Since 2010, startups founded solely by women have generally had shorter times to exit. In 2017, female-founded companies had a first-funding-to-exit time span of less than four years, while the comparable number for all-male founded companies was more than five years. 
  • Olson also found that female-founded startups typically have a lower return on investment than male-founded startups.

In both articles, Olson highlighted the methodological concerns of her research due to the limited number of female-founded companies backed by venture capital. With only 2.2 percent of all VC-backed companies being female-founded, Olson highlighted the potential limitations of the research. She also raised an important point – “we don't know how many female-founded companies aren't included in the dataset because they never received any institutional backing at all.” There also may be issues with reporting that might be skewing data.

Olson concludes that the findings support the need for more diversity in the venture capital world. She contends that more female VCs may lead to more funding for women or more funding for women will lead to more female-founded startups.


venture capital, inclusion