Gender equality in venture capital improving but far from even

August 6, 2024 (Preqin News) – The journey to gender equality in venture capital (VC) will be a long one. However, progress is being made, with women now making up almost a quarter of employees at VC firms, with higher representation at firms with a healthcare focus.

The proportion of female employees at VC GPs has risen from 19.6% in January 2020 to 23.4% in January 2024, according to Preqin’s Women in Alternatives 2024 report, while representation is also higher than the 21.8% average across all alternative asset classes.

There are higher proportions of women at VCs targeting healthcare-related sectors, particularly in junior and mid-level roles. VCs investing in healthtech have the highest female representation at the junior level (40.1%), followed by biotech (39.8%), AI (39.6%), healthcare IT (39.2%), wearables (39%), and software (38.7%), compared with an average of 38.6% across VC.

At mid-level, healthtech also leads (30.5%), followed by AI (29.8%), healthcare IT (29.7%), cybersecurity (29.6%), software and wearables (29.2%), and biotech (28.8%), with the average across VC standing at 28.9%.

For senior roles, women are best represented at VCs investing in wearables (19.2%). However, the healthcare focus is still evident, with healthtech (18.4%), biotech (17.7%), and healthcare IT (17.4%) the sectors with the next highest levels of female representation, compared with a 16.3% average across VC.

There has been significant progress in bringing more women into senior roles in recent years, with the proportion of women in C-Suite roles in North America rising 64.7% between 2015 and 2023, albeit from a very low base, according to research by McKinsey & Company and Leanin.org.

However, the World Economic Forum’s 2024 Global Gender Gap Report notes that while there is progress across four key dimensions of gender equality – Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment – at current rates it will take 134 years to reach full parity.

Better representation of women at GPs could transform the VC and tech world. This could unlock opportunities for women, narrow the innovation gap, and address low VC funding for female founders, who have historically received only 2% of invested capital. Female investors can better relate to sales pitch crafted by women founders, which could help increase entrepreneurship and develop digital tools improving women’s wellness, including fertility tracking apps and apps teaching financial literacy.

There are also sound financial reasons for a more balanced investment approach. The Pew Research Center found that 40% of households with children in the US include mothers who are either sole or primary breadwinners, highlighting the increased involvement of women in financial decision-making and the importance of their ability to manage their finances. McKinsey notes that, in Europe, women are the driving force behind more than 70% of purchasing decisions.

Although the gender gap persists, things are changing. The Female Foundry, a London-based network of VCs and female founders, reported in its State of Gender Diversity in European Venture 2024 survey that 40% of VC investors spend more time seeking investment opportunities in female-led startups, while 70% of respondents keep track of the number of women-founded companies going through their investment pipelines.

However, dismantling the gender barrier and challenging stereotypes starts at a young age. More needs to be done by the tech industry and national education systems to reap the benefits of investing in untapped female talent. Making STEM education more attractive for girls, revamping the recruitment process for engineering jobs, hiring women from different academic backgrounds with soft skills for non-technical roles in cybersecurity, and upskilling them post-maternity leave to keep up with fast-changing technology will make them more adaptable. Promoting women to senior leadership positions and having female role models in companies might help retain developed talent.

‘Women have the power to turbocharge the sputtering global economy,’ said Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics, in its latest Women, Business and the Law report. ‘Yet, all over the world, discriminatory laws and practices prevent women from working or starting businesses on an equal footing with men. Closing this gap could raise global gross domestic product by more than 20% – essentially doubling the global growth rate over the next decade.’

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.}