Venture Capital
How venture capital actually works, what it costs founders, and why 1% of it goes to companies founded by women.
Venture capital is money from professional investors who fund startups in exchange for equity, betting that a small number of massive wins will cover the losses from everything else. A VC fund raises money from institutions and wealthy individuals, deploys it into dozens of companies over several years, and needs roughly 3 out of every 10 investments to succeed in order to return the fund. The rest are expected to fail.
In 2024, companies founded solely by women received 1% of all venture capital funding in the United States. Women-founded startups generate 78 cents in revenue for every dollar of funding, compared to 31 cents for male-founded startups, which means VCs are systematically underinvesting in the founders who use their money most efficiently.
How It Works
The fundraising stages
Venture capital flows in rounds, each named for the company’s stage of growth. A seed round is the first institutional money, typically $2.5 to $5 million in exchange for 20 to 30% of the company including the employee option pool. Series A follows once the company has proven its product works, averaging around $18.7 million. Series B and C rounds grow larger as the company scales, frequently exceeding $30 million and $50 million respectively. Each round dilutes every existing shareholder, including the founders.
What VCs get for their money
A VC’s ownership stake is only part of what they receive. The lead investor in a round typically gets a board seat (61.5% of the time), preferred stock with a liquidation preference that guarantees they get paid before founders in any sale, and anti-dilution protections that shield their ownership percentage if the company raises money at a lower valuation later. The term sheet, which is the document that outlines these terms before the deal closes, contains provisions that can matter more than the ownership percentage itself.
The math of founder dilution
Most founders do not realize how quickly their ownership shrinks. A seed round typically takes 20 to 30% of the company. Series A takes another 20%. By Series B, most founders hold less than 30% of the company they built from scratch, and by Series C that number drops to 15 to 25%. This is before accounting for shares allocated to the employee option pool, which gets replenished at nearly every round and dilutes founders further.
The Funding Gap
The numbers on who gets funded tell a story that the venture capital industry has failed to correct for decades, despite being fully aware of it.
| Metric | Women-Founded | Men-Founded |
|---|---|---|
| Share of US VC funding (2024) | 1% | 85%+ |
| Revenue per dollar invested | $0.78 | $0.31 |
| ROI outperformance | 35% higher | Baseline |
| Capital burn rate | 15% less | Baseline |
| VC partner representation | 15.4% of partners | 82% of decision-makers |
Companies with at least one female founder performed 63% better than all-male teams across a 10-year portfolio review by First Round Capital. VC firms with 30% or more female partners invest 4.7 times more in female founders, but only 4.9% of VC firms have a majority of female partners. The pipeline problem is not about deal quality. It is about who writes the checks.
In 2025, headlines declared a record year for female founders at $73.6 billion in total funding. Remove two AI companies, Anthropic and Scale AI, and over $30 billion vanishes from that number. The deal count for female-founded companies actually hit its lowest point since 2018.
Examples
Glossier: $266 million in funding, and then the reckoning
Glossier raised $266 million across six rounds, from a $2 million seed to a $100 million Series D that valued the company at $1.8 billion. Sequoia Capital called it “one of the most efficient direct-to-consumer businesses we’ve encountered.” Then growth stalled after the pandemic, the board pushed out founder Emily Weiss as CEO, and by 2025 the company was seeking new funding below $1 billion, a down round that would dilute existing shareholders and confirm that the $1.8 billion valuation had been aspirational.
Bumble: from IPO darling to 95% collapse
Bumble took early funding from Andrey Andreev, who held 79% of the company before selling to Blackstone at a $3 billion valuation. The IPO in February 2021 valued Bumble at $13 billion, making founder Whitney Wolfe Herd a billionaire on paper with a 1.5% ownership stake. By 2026 the stock had fallen 95% from its peak, Wolfe Herd had stepped down as CEO, and her net worth had dropped from billionaire status to an estimated $400 to $600 million. She built the company, but rounds of dilution meant she owned almost none of it by the time it went public.
Spanx: 21 years of saying no
Sara Blakely started Spanx with $5,000 of her own savings and turned down every investor who approached her for 21 years. She owned 100% of the company when Blackstone bought a majority stake in 2021 at a $1.2 billion valuation. Because she had never diluted her ownership, Blakely kept roughly $1 billion from that single transaction. If she had taken a typical seed round and Series A, her payout would have been a fraction of that number.
Glamnetic: $50 million on $5,000
Glamnetic launched with $5,000 in personal savings and hit $50 million in revenue by the end of its second year without raising a single dollar of outside capital. Founder Ann McFerran bootstrapped the entire operation, spending $20 million on paid ads funded entirely by the company’s own revenue. She retained full ownership and control because there were no investors, no board seats to give away, and no term sheet dictating her growth timeline.
Canva: VC done right
Canva is the counterexample, the version of venture capital that actually works for the founder. Melanie Perkins raised venture funding while retaining a significant ownership stake, and the company reached a $26 billion valuation. Perkins and her cofounder own an estimated 30% of the company combined, worth roughly $8 billion, because they raised capital efficiently and maintained enough leverage to resist excessive dilution at each round.
What People Get Wrong
“You need venture capital to build a big company.” Spanx reached a $1.2 billion valuation without a dollar of outside investment. Glamnetic hit $50 million in revenue on $5,000. Crumbl scaled to $1 billion in revenue on a $68,000 initial investment. Only 3% of startups ever raise venture capital, and 86% of successful businesses are bootstrapped. VC is one path to growth, and it is the least common one.
“Taking VC means you’re still in charge.” Between 20 and 40% of startup founders are replaced as CEO by their own investors. Maintaining 50% ownership does not guarantee control because VCs wield power through preferred stock provisions, board seats, and protective covenants that give them veto rights over major decisions. Emily Weiss learned this at Glossier when board pressure pushed her out of the CEO role at the company she created.
“A high valuation means the company is worth that much.” A $1 billion valuation means an investor paid a price that implies the whole company is worth $1 billion. It does not mean anyone would buy the company for that price, and it does not mean the founder’s shares are liquid. Bumble was “worth” $13 billion at its IPO peak and traded at a $450 million market cap three years later. Valuations are opinions until someone writes a check for the whole company.
“Women don’t get funded because they don’t ask.” Women apply for venture capital at roughly the same rate as men. The gap is in who gets funded, not who applies. Male VCs ask women founders prevention-focused questions (“How will you defend against competitors?”) while asking male founders promotion-focused questions (“How will you grow?”), and this framing difference alone accounts for a significant portion of the funding gap according to research from Harvard Business School.
Frequently Asked Questions
What is venture capital?
Venture capital is a form of private equity financing where professional investment firms fund early-stage companies in exchange for ownership stakes. VC firms raise money from institutional investors like pension funds, endowments, and wealthy individuals, then invest that capital across a portfolio of startups. The typical VC fund invests in 20 to 30 companies, expects most to fail, and relies on a small number of outsized returns to generate profits for the fund.
How much equity do you give up to venture capitalists?
The median dilution per round is 20.1% at seed, 20.5% at Series A, and 16.7% at Series B, according to Carta data from 2024. These percentages are before accounting for the employee option pool, which typically adds another 10 to 20% of dilution at the seed stage. By the time a company has raised through Series C, founders typically own 15 to 25% of the company they started.
How much do VCs invest at each stage?
Median round sizes in 2024 to 2025: seed rounds range from $2.5 to $5 million, Series A averages $18.7 million, Series B runs $27 to $30 million with an upper quartile above $50 million, and Series C rounds frequently exceed $50 million. These figures have grown significantly over the past decade as more capital has entered the venture ecosystem.
What percentage of VC-backed startups fail?
Roughly 75% of venture-backed startups never return any money to their investors, according to research from Harvard Business School. Only 46% of seed-funded companies raise a second round. About 35% of Series A companies fail before reaching Series B. Past Series B, the failure rate drops to roughly 1%, but reaching that stage is the hard part.
What percentage of venture capital goes to women?
Companies founded solely by women received 1% of US venture capital in 2024, down from 2.1% in previous years. Mixed-gender teams received about 14%, and all-male teams received roughly 84%. The deal count for female-founded companies hit its lowest level since 2018 in 2025, despite headline-grabbing total dollar figures inflated by a handful of large AI rounds.
What is a term sheet?
A term sheet is a non-binding document that outlines the key financial and governance terms of a venture capital investment before the deal closes. Critical terms include the valuation (pre-money and post-money), the liquidation preference (who gets paid first in a sale), anti-dilution protections (what happens if the next round is at a lower valuation), board composition (how many seats investors control), and protective provisions (what decisions require investor approval). The term sheet is where founders lose control of their companies, often without realizing it until the provisions are triggered.
What are the alternatives to venture capital?
Angel investors typically invest $25,000 to $100,000 individually or $500,000 to $2 million through syndicates, taking 5 to 20% equity. Revenue-based financing lets you repay 5 to 15% of monthly revenue until you hit 1.3 to 2 times the original loan amount, with no equity given up. SBA microloans provide up to $50,000 at 8 to 13% interest with no equity requirement. Equity crowdfunding under Regulation CF allows raises up to $5 million per year, with a median successful campaign raising $114,000. Bootstrapping remains the most common path, funding 86% of successful businesses.
What is a down round?
A down round happens when a company raises money at a lower valuation than its previous round, which means every existing shareholder’s stake is now worth less on paper. Glossier experienced this when it sought funding below $1 billion after previously being valued at $1.8 billion. Down rounds often trigger anti-dilution protections for earlier investors, which means the founders absorb a disproportionate share of the valuation drop while investor ownership is partially protected.
What is liquidation preference?
Liquidation preference determines who gets paid first when a company is sold or exits. The standard is 1x non-participating, meaning investors get their original investment back before founders and employees see anything. If investors put in $20 million and the company sells for $25 million, the investors take their $20 million first and the remaining $5 million is split among everyone else. In a participating preference structure, investors get their money back first and then also take their percentage of whatever remains, which can leave founders with almost nothing in a modest exit.
Should I take venture capital for my business?
Most businesses should not. Venture capital is designed for companies that can grow to 10 to 100 times their current size within 5 to 7 years, which describes a tiny fraction of all businesses. If your company can be profitable at a smaller scale, if you want to maintain control over decisions, or if your industry does not support the exponential growth VCs require, bootstrapping or alternative financing will serve you better. The companies that benefit most from VC are those in winner-take-all markets where speed matters more than profitability and where the capital itself creates a competitive advantage that cannot be replicated without it.
How do VCs make money?
VC firms charge a management fee of 2% of the total fund annually, plus 20% of profits above a minimum return threshold (called carried interest). A $500 million fund generates $10 million per year in management fees regardless of performance, which means the partners are compensated even when their investments fail. The 20% carried interest is where the real money comes from for successful funds, but it only materializes when portfolio companies go public or are acquired at a price high enough to return the fund.
Sources
- Inc, “Wholly Women-Led Companies Attracted Just 1% of VC Funding in 2024,” 2025. Women’s share of VC funding statistics.
- Fortune, “Venture Dollars for Female Founders,” March 2026. 2025 female founder funding totals and the Anthropic/Scale AI distortion.
- BCG, “Why Women-Owned Startups Are a Better Bet,” 2018. Revenue per dollar invested comparison between male and female founders.
- Carta, “Dilution Data Q1 2024,” 2024. Median dilution rates by funding round.
- Harvard Business School, “The Other Diversity Dividend,” 2018. VC-backed startup failure rates and investor return data.
- Founders Forum, “Women Funding Statistics 2025,” 2025. Female VC partner representation and global funding breakdown by gender.
- SaaStr/Carta, “The Actual Dilution from Series A, B, C, and D,” 2024. Round-by-round dilution benchmarks.
- Inc, “Female Founders Outperform Male Counterparts,” 2024. First Round Capital 10-year portfolio performance data.
- Fundz, “Series A, B, and Beyond,” 2024. Average round sizes by stage.
- Crunchbase, “US Median Round Size,” 2024. Series B benchmarks and seed-to-Series-A conversion rates.
- HBR, “What Happens When VCs Replace the Founder,” 2018. Founder-CEO replacement rates in VC-backed companies.