The number of women-led unicorns is in decline. Does it have to be that way?

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Women’s History Month is a time to celebrate women’s achievements, and there’s certainly a lot to applaud when it comes to women in the startup space. But women startup founders’ progress gaining purchase in the VC funding ecosystem is still abysmally slow, especially in the rarified top tier of companies known as unicorns. 

It was in fact a woman—venture capital investor Aileen Lee—who coined the term “unicorn” in 2013 to signify startups that achieved a valuation of $1 billion or more. But the representation of women among unicorn founders has always been a tiny fraction of their male counterparts. This reflects a broader trend in venture capital funding, where less than one-fifth of venture-backed companies are typically founded by women.

The industry desires to do better…

Most VC firms say they are committed to increasing diversity, including gender diversity, among the companies they fund. 

“We’re interested in reshaping the way that tech looks,” Trevor McFedries, a startup cofounder who helped found Founders for Change, told the New York Times. Founders for Change is a coalition of founders working to push the venture capital industry to add diversity to its priorities. 

Indeed, at least one small venture capital firm, New York-based Swiftarc Ventures, made headlines by committing to hire only women in 2022. Its managing partner, Sid Jawahar, noted, “It would feel a bit hypocritical if we went out…with an all male team and said that one of our core values is gender equality…for our investments.”

…yet not much progress has been made

Nonetheless, since McFedries made his comment in 2018, women founders have continued to get only a tiny share of funding. The all-time high of VC dollars received by women founders in 2019 amounted to only 2.9% of total investments that year. 

U.S. startups as a whole raised $143 billion the following year—a record amount, and a jump of 12% from 2019 over the previous year. Yet funding by venture-backed companies founded solely by women plummeted 22% that same year

While women founders gained ground in 2021—described by Pitchbook's third annual “All In” report as a “banner year for exits of female-founded companies”—their presence among the most successful of VC-backed ventures has continued to decline sharply. 


Using anonymized customer data from the Affinity platform, Affinity confirmed that gender diversity among founders of companies reaching unicorn status each year has fallen by more than 100% from 2017 to 2021, with the number of newly minted unicorns founded by women plummeting from 13% to 6% in those four years.

There’s a reason why Startups Magazine titled an article, “Women in Unicorn Businesses Almost as Rare as Unicorns Themselves.” Beyond any industry-specific workplace cultural issues, women at startups face the same challenges as women elsewhere in the workforce: the glass ceiling, a dearth of other female leaders and mentors, and, for many, little to no paid maternity leave or parental benefits. 

What’s really behind these disappointing stats? 

The pandemic may have made things worse…

The pandemic likely added another layer to plain-old, institutionalized workplace sexism, as the burden of childcare and education fell disproportionately on women when schools closed. This may have stymied the potentially aggressive growth of some women-led startups. Crunchbase found that venture funding to female-founded startups dropped by 27% from 2019 to 2020, the first year of the pandemic. 

“Women are even more burned out now than they were a year ago, and burnout is escalating much faster among women than among men,” write the authors of the “McKinsey Women in the Workplace 2021” report. “One in three women says that they have considered downshifting their career or leaving the workforce this year, compared with one in four who said this a few months into the pandemic.”

At least one successful female unicorn founder disagrees. “Remote work will create that flexibility and allow women to balance their work and personal life,” says Silvina Moschini, who became the first Latina to found a “pink unicorn,” when TransparentBusiness, a SaaS platform for managing remote workgroups, reached a $1B valuation. “Without this option, companies will not be able to prevent the drain of qualified women and, with them, the loss of resourceful and adaptable talent.”


…but the pre-pandemic landscape wasn’t much better

Whichever theory you subscribe to, women founders’ share of the VC funding pie was shrinking even before COVID-19. In 2019, only 12% of U.S. VC funding went to female-founded companies, despite the previous two record-breaking years, when U.S. VC firms dispensed more than $130 billion each year. 

Pam Kostka, CEO of All Raise, an advocacy organization for female investors and founders, says that this is in part because VC investing revolves around relationships and inside knowledge, which women are typically locked out of in male-dominated fields. She sees the drop in investment in female-led firms as a function of their disproportionately limited access to the industry during a period when concerns about a recession were growing and then overshadowed by disruption from the pandemic.   

“The flywheel of male-dominated wealth creation is hardening,” she commented to Crunchbase News

Relationship-building is at the heart of the solution

Commitments have been made

Facilitating women’s access to business networks and resources in the venture funding space is the foremost need to help increase gender diversity among startups, including unicorns. That’s why organizations like All Raise, Graham & Walker, Future Females, and Digital Undivided are focused on creating a more inclusive network for female founders that helps women build successful companies via improved connections and business advice and mentorship.

And all agree: networking is a fundamental key to success. “The size and quality of your business network can make the difference between success and failure,” unicorn founder Moschini adds. “My initial investors were my industry contacts and my LinkedIn followers. They helped me get the ball rolling.”

But while women-led efforts and organizations can make gains in forming alternative pathways and networks, it’s essential for the male-dominated field to reckon with what real inclusion looks like and what they can do to actively fight gender bias. 


“There are so few female role models that it can be tricky to understand how to forge the path into leadership,” says Maddy Cross from Notion Capital, the author of a report showing that only 21% of B2B unicorn tech companies in the U.S. and Europe have female leadership. 

“There needs to be a discussion at leadership levels across global B2B tech unicorns about how to include women, and why it’s important to include women.”


Diversity is good business

The fact is, diversity of all kinds is good for business, and the venture capital industry is not exempt from that. Bringing a diverse range of people to the table lets a business benefit from many perspectives, networks, life experiences, and points of view; conversely, a lack of diversity can inhibit VCs’ efforts to find the most exciting and promising new ventures to fund. 

A failure to fully include women puts a firm at risk for lost opportunities. Ensuring that women become part of every VCs network of business contacts is an important start to opening the field up to a new world of ideas and directions—and, hopefully, parity in the number of woman-led VC firms, startups, and unicorns.


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