Not subscribed? Sign up here.

Hi John,

This week's newsletter features insights from Julianne Zimmerman on why more meetings don’t mean more opportunities for every founder. Also, we share data on the current state of the venture market, advice for founders looking to raise debt as capital, and ask founders to contribute to our ongoing startup fundraising research.

Why more meetings don’t mean more opportunities for every founder

Research shows that while female and minority founders are getting more attention from VCs, they still don’t raise nearly as much as all-white male teams nor are they treated with the same scrutiny. Here's Julianne Zimmerman of Reinventure Capital's insights

Progress has to start somewhere. I’d like to think, or perhaps hope, that we’re in the early stages of redefining the status quo of fundraising–the one in which all-white male teams out-raise everyone by multiples. But if the research is any indication, we still have a long way to go.

While female and minority founders are getting more attention from VCs, they still don’t raise nearly as much as all-white male teams nor are they treated with the same credence. Over the course of 2020 and 2021, as the venture and PE sectors have raised and deployed record-setting quantities of money, the data show that those capital flows have doubled down on the status quo—white male founders—and channeled even more money to them at later fundraising stages.

If this is what VCs, LPs, and analysts consider progress, it’s time we recalibrate the conversation around what “progress” would actually be.

Awareness ≠ outcomes

On the basis of public declarations, it appears that investors are acutely aware of industry perception. After it was reported that all-female teams averaged the fewest investor meetings in 2020, all-female teams skyrocketed to the most meetings in 2021. Of all founder team demographics, all-female teams including BIPOC founders had the most meetings with VCs. But while Black, Brown, female, and other underrepresented founders might be getting more pitch deck views, meetings, and in some cases incrementally larger raises, the percentage of venture capital dollars flowing to them has remained steady or fallen.

That raises questions worth examining. For example, if access to investor meetings was the key barrier to founders raising capital, then significantly increasing the number of meetings would presumably result in more and larger capital commitments. The data show this has not been the case for all-female BIPOC teams. Despite averaging 57% more meetings than their peer groups, they had the leanest raises of all team demographics, averaging under a million dollars per raise, less than half as much money than all-white, all-male teams. So who is benefiting from those meetings?

Perceptions of credibility and risk

The data also invite questions about how VCs scrutinize founders and pitch decks. VCs tend to accept declarations from all-white male teams more or less at face value. But non-white, non-male founders encounter far greater skepticism. Whether it’s their degrees or previous job responsibilities, investors are much more concerned with verifying that the founders’ credentials are legitimate or that other information they provide is true.

This credibility bias further shows up in studies regarding how VCs evaluate pitch decks or presentations, as well as the types of questions they ask founders. For example, the questions investors ask female founders tend to skew to risk: female founders get peppered with questions that boil down to, “prove to us you deserve to be here,” whereas men are asked questions that essentially translate as, “show us you can think even bigger.”

The data in DocSend’s report reflect this dynamic in high relief. VCs spent more than twice as much time scrutinizing the product sections of all-male decks than all-female decks in 2021. This was one of the least scrutinized slides for all-female teams. Instead they probed women harder on the business model, spending 43% more time on business models from all-female decks than those from all-male teams. 

This is indicative of an acute divergence of expectations. Male founders hear: “What if you had more money? How quickly could you increase the slope?” Female founders hear: “How are you actually going to hit these projections? How are you mitigating against downside scenarios?” It’s not at all surprising that these conversations lead to very different capital decisions, no matter how many meetings are taken.

In order to make meaningful progress, we need to define what it is — and isn’t
In the venture sector, capital is hyper-concentrated in the hands of white male teams. That hyper-concentration inflicts material costs on LPs, the economy, and society, as multiple parties have documented. Given that the data indicate that diversifying portfolios increases financial performance and decreases risk, doing so should not be controversial. However, bias is baked into finance systems at every level and it’s difficult to uproot because it is so ubiquitous that financial sectors — venture included — have been widely accepted as meritocracies, abundant evidence to the contrary. 

The next decade belongs to those who take action now

For more of my thoughts on how change is both feasible and beneficial, read my full blog post backed by data and my experience working with and investing in diverse startup founders.

Pitch Deck Interest Metrics Update

Whereas Q1 got off to a slow start at the beginning of April, last week saw more movement in the startup fundraising marketplace. Investor interactions fell 9.96%, Time Spent per deck had a 0% change, and Founder Links Created jumped 6.67%. Here's the full analysis of last week's activity.

Recommended Reads

Start of the Current Market

A presentation by Logan Bartlett of Redpoint Ventures sharing data on the forces driving the last two years of venture in the tech market.

View the presentation

VC distributions are down 90% in Q1, says Industry Ventures, an LP in 450 funds

VC distributions are down 90% in Q1, says Industry Ventures, an LP in 450 funds
Here are some highlights from the chat, which offers a useful snapshot of current conditions that other investors – and founders – might benefit from knowing, even while Hans Swildens  himself offers that this moment could be a blip. 

Read the post

16 Things to Know About Raising Debt for Startups

In this post, Nathan Yoon and Melissa Wasser of A16Z cover the most common questions we hear, starting with the basics of how debt works, before breaking down the different debt options available at different stages and the current ecosystem of lenders.

Read the post

Startup Fundraising Research Survey