Bitget Report: Blockchain Market Funding Shows Limited Gender Diversity, Female-led Startups Raise Only 6% Of Overall Funds

This study investigates the current state of funding for blockchain startups, focusing specifically on the disparity in investment patterns between male- and female-led startups. Bitget analyzed recent funding data to assess the degree of change in investment patterns for both groups over the past two years. The analysis utilized both qualitative and quantitative methods to evaluate the extent of the funding gap.

Key takeaways provided as a result of this research may be useful in understanding potential strategies and solutions to promote equal access to funding and foster a more inclusive environment for women within the blockchain industry. Specifically, the study seeks to:

Analyze the degree of change in funding patterns for blockchain startups led by male and female founders over the past two years.

● quantitatively evaluate the current difference in funding for male- and female-led startups:

● propose potential strategies and solutions to promote equal access to funding for women in the blockchain industry:

● investigate potential strategies for fostering a more inclusive environment for women within the blockchain ecosystem.

By gaining a deeper understanding of the gender gap in blockchain startup funding and exploring potential solutions, Bitget hopes to contribute to the creation of a more equitable and inclusive environment for all participants in this industry.

Key Takeaways

● Fundraising by blockchain startups fell by 70.1% per quarter (comparison of Q1 2022 and Q3 2023).

● The number of female-led blockchain startups has fallen by 45.2% since the beginning of 2022 but is already showing a recovery.

● During the study period, blockchain startups raised $27.85 billion, with female-led blockchain startups securing only 6.34% of the overall funding.

● The number of female-led blockchain startups is less than 9% of the total.

● Female-led blockchain project funding is more sensitive to negative changes but less sensitive to bullish trends

● The share of female-led blockchain startups shows an upward trend, but the moment of reaching equilibrium with male-led ones is far distant.

Methodology

Bitget analyzed data from 2022 and the first three quarters of 2023, focusing on both startups and blockchain-based startups. In this context, a 'female-led blockchain startup' refers to a blockchain startup where at least half of the executives are women.

Research

General trends

Blockchain startups, much like other startups, share several common traits. These crypto ventures disrupt conventional business models and introduce innovative solutions, striving for rapid expansion and a significant market foothold. Yet, be it in blockchain or any other domain, startups grapple with uncertainty and risks within a resource-constrained environment. Here, venture capital emerges as a crucial lifeline, capable of fueling growth. Securing it requires showcasing the project's merits, its relevance, a robust developmental roadmap, and adept pitching and networking skills. Consequently, the team's composition and the founder's personality rank among the pivotal factors that attract investor interest and breathe life into a startup.

In 2022, total venture capital investment reached its second-highest figure, with startups raising $400 billion [2-6]. Within the US, 20.3% of this sum was garnered by companies with one or more female founders. Notably, a fifth of the funds acquired displayed a decrease in investment levels for women-led startups compared to 2021, indicating substantial progress in the ongoing trend over the past decade. Specifically, companies exclusively led by female founders accounted for a mere 2.1% of all venture capital investments [11].

Fig. 1: Startup funding (2022-2023)

The data for 2023 only covers the first three quarters. According to this information, while the investment amount in startups has decreased, it doesn't exhibit the same consistent downward trend seen in the previous year. The quantitative indicators of startup deals have also decreased (refer to Figure 2). In 2023, the number of these deals dropped by a quarter compared to the first three quarters of 2022, declining from 71,760 to 54,702.

Fig. 2: Number of startup deals in 2022-2023

Blockchain startups

Overall market trends, such as the bearish sentiment, also have a significant impact on the blockchain startup sector. In 2022, the number of deals in this area plummeted by 61.6% (from 856 deals in the first quarter of 2022 to 329 in the second quarter of the same year). However, there was a slight recovery observed in the third quarter of 2023, with 364 deals recorded (refer to Figure 3).

The bearish sentiment is also evident in the chart depicting investments in blockchain startups (Fig. 4). The lowest recorded figure stands at $1.97 billion, constituting 29.1% of the peak seen in early 2022. Fundraising of blockchain startups dropped by 70.1% per quarter between Q1 2022 and Q3 2023.

Fig. 3: Number of blockchain startup deals

Fig. 4: Raising investments in blockchain startups in 2022-2023

In 2023, there was a deviation from the consistent trend of securing the largest portion of investments in later rounds. While the preceding three quarters of 2023 saw dominance in Series C and subsequent funding, the third quarter of 2023 witnessed a rise in the proportion of funds raised during Series A or Seed rounds (Fig. 5).

Fig. 5: Investment segmentation in blockchain startups

Correlation of founders' gender and investments in blockchain startups

During the study period, blockchain startups raised $27.85 billion, with female-led blockchain startups securing less than a fifteenth of this total. The $1.77 billion invested in these startups represents 6.34% of the overall amount. However, there was a two-fold decline in funding compared to the first three quarters of 2022 and 2023: from $1,036.98 million to $469.37 million (Fig. 6).

The decline in funding is also noticeable in blockchain startups led by men (Fig. 7). Unlike their female-led counterparts, these startups didn't react significantly to the downturn starting in Q2 2022. This discrepancy suggests that female-led startups might respond more acutely to crises.

Fig.6: Women-led blockchain startup funding in 2022-2023

Fig. 7: Men-led blockchain startup funding in 2022-2023

When comparing the funding figures for female-led and male-led blockchain startups in absolute terms, it is possible to see a more significant decline for the second (Fig. 8). This can be explained by the small share of female-led blockchain startups in the overall structure of blockchain startup funding.

Fig. 8: Blockchain startup funding by gender (in Million $)

The number of blockchain startup deals with female founders (Fig. 9) does not fully reflect the dynamics of funding for these projects (Fig. 6). As of Q3 2023, there were 31 female-led startups, which is 15 more than in the first and second quarters. This figure is not yet sufficient to indicate a recovery to the 2022 level, but further monitoring may confirm the upward trend that began after the second quarter of 2023. A significant increase in the number of female-led startups with little change in the amount of funds raised may indicate a decrease in the average amount invested in these projects.

Changes in the number of blockchain startups

Fig. 9: Number of deals involving female-led blockchain startups

Changes in the number of male-led blockchain startups (Fig. 10) were smooth and did not show a sharp increase compared to Q2 and Q3 2023, as was the case with the dynamics of changes in the amount of their funding (Fig. 7). The positive market changes that began in mid-2023 did not have time to affect these indicators.

The number of male-led startups in Q3 2023 (333) did not exceed the figure for Q1 2023 (366) and is only 6.4% higher than the result of Q2 2023 (313). At the same time, the number of female-led blockchain startups has fallen by 45.2% since the beginning of 2022 but is already showing a recovery. The number of women-led startups in Q3 2023 (31) is 93.6% higher than in Q1 and Q2 (16). It can be assumed that female-led startups are less sensitive to bullish trends, and therefore, their quantitative and qualitative indicators can be expected to grow over a longer period, with the continued growth of the crypto market capitalization and the spread of blockchain technology.

Considering the share of female-led blockchain startups, it is worth emphasizing their rapid recovery after the decline in the first half of 2023 and surpassing the state of 2022. While the peak value in 2022 was 8.3%, in Q3 2023, this result was increased to 8.6%. When drawing a trend line, positive changes can be noted during the study period (Fig. 11). However, the share of female-led blockchain startups remains very small, making less than 9% of the total startup market.

Figure 10: Number of deals involving female-led blockchain startups

Figure 11: Share of female-led blockchain startup deals

The opposite situation is observed when plotting the trend line for the share of male-led blockchain startup deals (Fig. 12). If this trend continues in the coming years, the share of female-led startups will grow, striving for gender balance.

Fig.12: Share of male-led blockchain startup deals

Funding by Stage

A breakdown of investment rounds can provide insight into the level of risk appetite and investment strategies in the market. The graph of male-led blockchain startup funding by stage (Fig. 13) is significantly similar to the general graph of raising funds in blockchain startups (Fig. 5). Despite the decline in absolute values, raising at Series C and later rounds is not a trend anymore in 2023. More investments come at the seed round and series A.

Series A funding emerged as the primary fundraising method for both male and female-led blockchain startups. However, female-led startups have secured the majority of funds through seed rounds in the last two quarters, potentially indicating increased investor confidence and a willingness to mitigate investment risks associated with blockchain projects led by female founders (Fig. 14).

Fig. 13: Male-led blockchain startup funding by stage

Fig.14: Female-led blockchain startup funding by stage

Conclusions and Further Prospects

8.2% of funding for female-led blockchain startups as of Q3 2023 is 2.5 times lower than the overall figure for startups in various fields (20.3%). This indicates the need for comprehensive measures to increase the inclusiveness and accessibility of the blockchain sphere for women.

The number of blockchain startup deals gradually decreased until Q3 2023 and showed a slight recovery at the end of the study period. The situation in the fundraising market significantly correlates with the crypto markeT prices and trends, which can explain some drop in investments in late 2022 — early 2023. Female-led blockchain projects funding is more sensitive to negative changes in the market (first half of 2022, Fig. 6). The creation of specialized incubator programs and venture capital funds can lead to the flourishing of this category of startups in terms of numbers and stabilize their market behavior to approach the smooth dynamics demonstrated by male-led startups (Fig. 7).

Raising investments in blockchain startups shows a downward trend without significant prerequisites for an upward movement by the end of 2023. Early investors' interest may demonstrate their belief in the transformational potential of selected startups and their willingness to support the development of these projects in the long term. Expectations of quick super-profits are less likely to be a motivator for this investment model.

The points with minimal funding for female-led startups have already been passed in the period under study (Fig. 9). Unlike startups with male founders, they were able to recover much faster, as evidenced by the results of the third quarter of 2023.

Initial investments are inherently risky, as many startups fail to survive. However, the potential rewards for successful blockchain startups can be significant, which may encourage investors to take a chance. The growth in the share of early investments indicates an appetite among investors for innovation in female-led projects (Fig. 14). With more projects receiving early-stage investment, competition among female-led startups is likely to increase. This could lead to faster innovation and the development of new, more sophisticated blockchain startups.

The decrease in the average investment amount against the background of an increase in the number of female-led startups funded may indicate that investors are interested in smaller projects that require fewer resources for development. Projects that meet these requirements are more likely to receive funding at an early stage.

Several factors influence the number of female-led blockchain startups and their funding, including:

● general trends in investing in startups

● crypto market situation;

● investor sentiment;

● investor bias, etc.

With an increase in the number of startups with female founders, investors will be able to see that their prejudices are unfounded. This may lead to a transition from linear to hyperbolic growth in the share of female-led blockchain startups in the overall structure. In this case, the dominant position of blockchain startups led by male founders (91.39% of male-led blockchain startup deals in the third quarter of 2023) may be replaced by a ratio close to gender equality.

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