Gender and racial makeup of startup's founding team impacts funding

A recent report by DocSend Inc., a subsidiary of DropBox, surveyed over 300 pre-seed startups, finding that on average, in terms of gender alone, mixed teams raise the most funds, while all-male teams raise the least. In terms of both gender and race, on average, mixed gendered teams with minority members raise the most funds while all-male teams with no minority members raise the least. These findings are consistent with prior studies in terms of reflecting the levels of access to funding opportunities, relative lack of investment in diverse teams, and systemic gender bias.

In their study, DocSend divided the demographic makeups of startups into two different sets: Gender (all-female, all-male, mixed) and Gender/Race (all-male/no minority, all-female/no minority, all-female/minority, all-male/minority, mixed/no minority, mixed/minority), and measured the amount of funding raised and number of meetings held with VCs, among other variables.

By gender, startup teams consisting of both males and females (mixed gender) generated the largest average amount raised ($970,000) and conducted the greatest number of meetings (49), while all-male teams raised the least ($770,000) and had the fewest meetings (34). All-female teams raised an average of $800,000 and held an average of 47 meetings.

However, SSTI analysis reveals that when considering a USD raised per meeting “efficiency” rating, all-male teams garnered the most (approximately $22,650) per meeting, while all-female teams received nearly 25 percent less, or approximately $17,000 per meeting. This leaves mixed gender teams in the middle; while the average mixed gender team generated the most funding by far, they did so in the most amount of meetings, raising the question of whether or not they had more unsuccessful meetings or simply lower levels of funding per meeting.

Additionally, past SSTI analysis of a 2018 Pitchbook study found that female-founded startups may provide a unique set of benefits to investors as opposed to male-founded startups; in 2017 the median OIC (multiple on invested capital, defined as exit value/total VC raised) for all-female teams was 18x, as compared to just 5x for all-male teams. It was also found that all-female teams had shorter times to exit.

Breaking the stratum down further, by gender and race, mixed/minority teams raised the most USD on average ($1,300,000) while all-male/no minority raised the least ($860,000). All-female/no minority teams had the fewest meetings (35) on average, while all-female/minority teams had the most (74).

All three team makeups with no minority members held the least amount of meetings on average (36), while those with at least one minority member held significantly more (63).

In terms of efficiency, all-female/no minority teams yielded the highest levels of funding, raising approximately $31,500 per meeting, while all-female/minority teams yielded 63 percent less than their counterpart’s funding levels (approximately $11,600 per meeting). All-male/minority and all-male/no minority composed teams both had very similar efficiency levels (see above chart), while the two other gendered strata (all-female and mixed) had much larger differences in efficiency depending on the presence of a minority member.

All three strata inclusive of minority members had the lowest efficiency ratings, as they held many more meetings while raising less overall funding, when compared to their no-minority counterparts. This is consistent with findings from past SSTI analysis of an SBA study that showed minority entrepreneur’s higher likeliness to try and establish new funding relationships while remaining less likely to receive funds from those sources.

By using an efficiency rating of USD raised per meeting, rather than independently viewing the number of meetings and total funding, we can gain insight into how “successful” different makeups of startup teams are in acquiring funding with each meeting. Having a high number of meetings or a high level of funding on its own does not necessarily indicate a high level of performance, while a ratio reveals a more standardized metric.