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New Report on Funding Divide Shows Progress for Minorities, Hurdles for All-Female Teams

Amidst funding surge, data from DocSend Startup Index reports one step forward, two steps back in closing the gap on fundraising bias.

Dropbox recently announced that DocSend released a new research report showing definitive progress in fundraising success for startup founder teams with minorities. However, the report also showed greater hurdles for all-female founder teams seeking funding for their businesses.

When raising early-stage capital (pre-seed or seed round) in 2020, founder teams with minority members raised 42 percent more than teams with no minority members. Yet in the same year, all-female teams raised 70 percent less than the amount raised by all-male teams. All-female teams raised on average just $195,000 while all-male teams raised an average of $659,529.

Illustrating the funding divide

The report, The Funding Divide: Tracking Bias in Early-Stage Fundraising, is a comprehensive analysis of the early-stage startup fundraising process. It looks at how founder team demographics like gender and race can affect the productivity and success of their fundraising. 

DocSend surveyed 200 startups at the pre-seed and seed stage and analyzed pitch decks slide-by-slide to understand how VCs scrutinize pitch decks. All data comes from companies that opted into the process. DocSend gathered the data across 2020 and 2021.

“For women and minorities pursuing fundraising, 2020 was one step forward, two steps back,” said Russ Heddleston, CEO and co-founder of DocSend. “While we see progress in the ability of teams with minorities to fundraise, all-female teams have fallen behind. The positive movement for founder teams with minorities is encouraging, but we clearly need more support for all-female founder teams.”

“With last year’s renewed focus on diversity and social justice, many VCs were very mindful of the fact that they may not have given enough attention to minority-led businesses in the past,” said James Norman, Partner at Transparent Collective. “While the numbers here are encouraging for pre-seed and seed-stage minority-led founders, I’ve seen Series A and later-stage startups have even more success in getting funding. Over the past year, VCs were focused on more experienced startups with a clear track record, which makes sense. But there are still a significant number of viable and valuable earlier-stage minority-led startups not getting the attention they deserve. Let’s hope that these numbers continue to increase and lead to stronger funding activity for this group as a whole.”

Funding for women

In 2020 on average, all-female teams spent 21 percent less time fundraising than all-male teams and 15 percent less than mixed-gender teams. Less time spent fundraising for female founders also correlates with fewer meetings with investors. All-female teams had 31 meetings on average, compared to the 35 meetings all-male teams had.

When taken into account that all-female teams raised the least overall, they may have given up on fundraising more quickly. This could have happened after struggling to gain traction among investors. They also may have cut short their raise after not making enough progress toward their targets.

More scrutiny, more success

The time investors spend on decks is a highly contextual measurement. More time spent can be a positive indicator when linked to successful fundraising outcomes. However, it can also be a negative sign of increased scrutiny when it correlates with less successful outcomes.

Our 2021 Pre-Seed Fundraising Research revealed that decks from funded startups had longer investor viewing times than those that were unsuccessful. Teams with minorities had the longest average viewing times at 4:51, with teams with no minorities at 3:23. All-female teams had the shortest average viewing time of 3:20 in the pre-seed round, with all-male at 3:55. VC time spent analyzing pitch decks further highlights the growing disparity in success between founder teams of different gender and race makeup.

Increasing visibility

Discrepancies do not just occur in the overall investor viewing time of pitch decks; they also occur within specific deck sections. Investors spent more time on all-male decks than all-female decks and all-male teams also greatly out-raised all-female teams. This reflects the trend that more time spent viewing is a sign of a more successful deck.

For example, the ‘fundraising ask’ section was viewed very differently when comparing male and female teams. This section was the longest-viewed section of all-male decks (66 seconds), but investors spent almost 55 percent less time on this section when it came to all-female decks (30 seconds). When combined with pitch deck success, this data indicates that VCs are more serious about investments in all-male founder teams.

In addition, investors spent over 58 percent less time on the product sections in the pre-seed round of all-female decks than they did on all-male decks. As indicated in the 2021 Pre-Seed Research, the product section became one of the most crucial pre-seed deck sections last year.

For teams with minorities, investors spent more time viewing specific deck sections than for teams without minorities. Investors spent 140 percent longer on the business model sections of decks by founding teams with minority members and over 78 percent longer on the product sections. As teams with minority members tended to raise more than teams without minority members, more time indicates favorable scrutiny.

“Our goal at DocSend is to drive transparency into the fundraising process,” continued Heddleston. “This new research sheds light on how industry bias is manifested through VC interactions with pitch decks. With more awareness, and dedicated support and resources, we can continue to bridge the gap in the fundraising process.”

To dive deeper into the fundraising divide across pre-seed and seed-stage companies, download the full research report.

About DocSend:

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