When funding reverses attraction

2 min read · May 2, 2025
New Power Labs

When female-founded ventures are backed solely by female investors, they are two times less likely to secure additional funding than those backed by male or mixed-gender investors. On the other hand, backing from male investors doubles the chance of securing a second funding round for female founders. This effect does not impact male-founded firms (Snellman, Kaisa, and Solal, 2023).

This research found that neither the gender of the entrepreneur nor the investor independently affects the perceived competence of the entrepreneur. However, when a female investor supports a female entrepreneur, other investors perceive pitch quality and entrepreneur competence as lower, despite no difference in actual quality. It’s notable that, although it’s harder for female-founded firms with female investors to secure follow-on funding, those that do are three times more likely to eventually go public.

While the research identifies a “competence discount” when female entrepreneurs are backed only by female investors, the issue may go beyond gender. A smaller pool of experienced female investors and the reliance on tight-knit investor networks for social proof likely play an important role. In these networks, who invests often matters more than what they invest in, reinforcing bias and making it harder for outsiders to break through.

In our recent report, Levelling the Field: Expanding Access to Venture Capital for Women and Gender-diverse Entrepreneurs, we explore in depth why women and gender-diverse founders are overlooked in VC, and what we can do to move from exclusion to expansion.

Narinder

New Power Labs

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