Ann Arbor top city for female founders to raise venture capital, according to study

By Meredith Bruckner - Community News Producer

Rachna Govani, co-founder and CEO of Foodstand addresses members of U-M's Desai Accelerator (Credit: Desai Accelerator)

ANN ARBOR - It's no secret that Ann Arbor is a burgeoning tech hub.

Dubbed as the "Silicon Valley of the Midwest," startups continue to pop up and thrive in this city, many would say due to the University of Michigan.

But fresh data suggests it is a top city in the country for female founders to raise their first rounds as well.

VentureBeat recently published the results of a study by the Center for American Entrepreneurship that shows venture-backed startups with at least one female founder have seen a jump in successful investment rounds in Ann Arbor; Boulder, Colorado; and Memphis, Tennessee. These cities on average reported steadily higher shares of female-founded companies raising capital in their first round.

The study follows more than 20 years of "funding and exit milestones" of female-founded startups between 2005 and 2017. In Ann Arbor, 29 percent of female-led companies secured their first round between these years, compared to 16 percent nationwide. Between 2016 and 2017, that number climbed to 58 percent, compared to 21 percent nationwide.

Although 16 percent of startups examined had a female founder, the number of female-founded startups that successfully raised VC funds in the first round rose from 7 percent in 2005 to 21 percent in 2017.

"Women are [still] severely underrepresented in venture-backed companies, when compared with a whole host of other benchmarks," Ian Hathaway, author of the report, told VentureBeat. "But things are improving rapidly, and steadily."

Another finding was that female-founded startups that raised successful second or third rounds within a few years went public at the same rate as male-founded startups.

It's important to note that these smaller cities have less startups on average than bigger cities like New York City, San Francisco and Boston, making it difficult to compare landscapes.

Hathaway says reasons for the findings could be due to the rising number of female investors in these regions, or because the cities historically have supported a sector where companies with female founders make up a larger share, but further research is needed to determine why certain cities have higher numbers of female-founded companies securing early capital.

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