Hidden figures: How to get more women to pitch for tech funding

If you are female and have ambitions of starting your own company, whatever you do, do not look at the statistics out there about fundraising. If you are female and not white and/or not from a privileged background that enables you to know the right people, definitely do not look at the statistics. They are depressing, and they will most likely put you off. But the industry – in fact all industries – need you. If you are that woman, definitely look away now. According to research commissioned earlier this year by chancellor Philip Hammond and published by the British Business Bank, with Diversity VC and the British Private Equity & Venture Capital Association, for every £1 of venture capital investment, less than 1p goes to all-female-led teams. Yes, you read that correctly. Less than 1p. All-male founder teams by comparison get 89p of that £1, with the remaining 10p going to mixed-gender teams. These are shocking figures, but they are, sadly, not that unusual. There are reams of research papers out there that come to the same depressing conclusion. According to Pitchbook and the National Venture Capital Association, only 13% of US venture capital funding went to founding teams with at least one woman in 2017. In Europe, this is just 7%. And if you are a black female founder, the figures are even more depressing. According to the Global Entrepreneurship Monitor, black women have raised just 0.0006% of tech venture funding since 2006. I have probably raised more than that scrabbling for pennies down the back of my sofa. Strength in diversity The numbers just don’t make sense. Especially when we’ve all read the much-hyped headlines about diverse leadership teams generating higher revenues. There are numerous reports, particularly in the start-up community, that have found that diverse leadership teams yield a better return on investment for investors and better exits for entrepreneurs. One such study found that after a five-year period, for every $1 of venture capital invested, female-led or female-co-founded start-ups generated 78 cents of revenue. Male-led start-ups, on the other hand, generated 31 cents of revenue over the same period. So, what is going on and, more importantly, what needs to be done to level the playing field? Emma Sinclair, founder of alumni and talent management platform EnterpriseAlumni, has a clear and simple message, which she reckons if followed will level the playing field. “Buy our stuff,” she says. It is a simple message, but an honest one too. It would be easy here to talk about the need for female- or diversity-focused VCs to be established in order to change those figures. And several such funds have already been established – they have big ambitions and are already doing some amazing things, or at the very least are already forcing people to look at the situation. There is Diversity VC, SAP.iO and the Billion Dollar Fund (see details below), to name just a few. However, there are plenty of people out there who will argue that such funds aren’t necessarily the answer, or not the whole answer. Other options There are all sorts of routes to securing investment that do not require funds from venture capitalists. For the connected, there are high-net-worth individuals or angel investors, and for the tech-savvy there is crowdfunding. It is a route that might not raise tens of millions of pounds per project, but for the almost 7,000 crowdfunding campaigns that were launched in the UK in 2018, it was a route that raised a not insignificant £60m. So, if the funding is out there somewhere, what is it that is stopping us from seeing as many successful female-led firms as male-led firms? Is the pool too small? According to the British Business Bank study, visibility is a big issue. It found that at the investment committee stage of the application process, 61% of VC firms didn’t see any all-female teams, and a quarter didn’t see any women at all. It also found that only 5% of pitch decks that reached the VCs it surveyed were from all-female teams. Some 20% were from mixed teams, with the remaining 75% from all-male-led teams. It is something that Dominic Wilson, co-founder and managing partner of proptech VC firm Pi Labs, can relate to. “Our pipeline of female founders can be as low as 5%,” he says. “Of the 1,000-plus applicants we get to take part in our cohorts, probably only 50 are from female founders. There is definitely a shortage in the pipeline of women coming through.” He questions why women are not putting themselves forward. It can’t be education, he says, as women outperform the boys at every level, so perhaps it has something to do with the fact that women are generally – or stereotypically – more rational than men when it comes to decision-making. “Starting a company is an irrational decision. It is high risk and super-stressful. Most human beings are not suited to it. Not everyone can be an entrepreneur. Is that part of it?” questions Wilson. “But what if people could see more women who had made those irrational decisions and seen them pay dividends? Would that change things?” [caption id="attachment_966352" align="aligncenter" width="847"] Travtus founder Tripty Arya speaking at EG’s 2018 Tech Live event[/caption] Leading the way Role models: women who have made it; women who have had people buy their stuff. This is certainly a common theme when it comes to finding solutions to improve the representation of female founders across all industries, with research showing that around 50% of all female founders cite a lack of available mentors as a barrier holding them back. However, like the four-minute mile, once someone shows that it is possible, others quickly realise that that which had seemed impossible is entirely doable. “We need some stellar female founders to make it – to IPO their companies,” says Wilson. He points to the need for a UK-version of Bumble founder Whitney Wolfe Herd, who attracted $10m of investment to set up the dating app in 2014 and is now preparing for a $1.5bn IPO of the company. For Savannah de Savary, founder of property showcasing platform Built-ID and successful fundraiser of more than £1m of investment, female role models have had a huge importance for her. “I never thought I would be an entrepreneur,” she says. “I just had the right female mentors around me. I had never been that person who wanted to run my own business.” But de Savary did have an idea, and the right support behind her to just go for it. “My gender has never come into it. I have never felt that I have been interrogated differently,” she adds. “I just had an idea. But you do need people to have your back to enable you to thrive.” Support network Cheerleaders. That’s what Tripty Arya, founder and chief executive of property management software company Travtus calls them. That support group of people who genuinely believe in what you are doing. With that support, you can handle the inevitable put-downs and shut doors that any founder – regardless of gender – will experience. She says that as a woman in tech, in business, you have to do more work. You have to fight all of the historical stereotypes, but that doesn’t make it impossible. She admits that she knew nothing about artificial intelligence before she launched Travtus and its AI Adam (purposely given a male persona because people still, sadly, relate better to a male name), but she knew she had a brain and that she could learn. And she did. “It is fear that holds people back,” says Arya, “but if you start doing it, the money will come.” Both Arya and de Savary are uncomfortable with investors having diversity quotas to reach and feel that VCs could help encourage more women into business in different ways. “Fundraising is based on the people you know – people who trust in you,” says Arya. “Even if it is a VC, they are making a bet on you, so people will look for a level of comfort. Investors are looking for a fantastic team, really good turnover, knowledge of the market and technical expertise. And then you need to demonstrate traction. They need to see the success.” If you are not able to demonstrate those key traits, any investor will – and should – step away, says Arya. What VCs could do instead of setting aside funds purely for female-founded companies is be more encouraging. VCs are still in many cases an “old boys’ club”, and the make-up of their own leadership is often lacking in diversity – in both gender and background. A learning process Both de Savary and Arya are proponents of VC workshops, where people who may not previously have had access to investors can learn about pitching and the investor environment. And where investors too can access an entirely different type of talent pool. This opportunity for women to practise pitching and to understand the VC community – and vice versa – could be just what is needed to help turn those depressing percentages into something more palatable. VCs have often been found to ask promotional questions of male founders – such as “how do you want to acquire customers?” – and preventional questions of female founders – “how many active users do you have?” Human nature means that we typically answer a question in the way it is asked. Ask an aggressive question, get an aggressive answer. Responding to a promotional question with a promotional answer has been found to correlate with a higher percentage of funding than when answering a preventional question with a preventional answer. However, having the skill and schooling to be able to answer a preventional question with a promotional answer has been found by researchers at Harvard Business School to lead to improved funding performance. For EnterpriseAlumni’s Sinclair, the answer is not just to change how you respond to questions, it is about changing the narrative entirely. It is about getting rid of the perpetually negative storytelling, about bringing an end to the headlines about the lack of investment in female-founded companies. For her, it is about concentrating on supporting the scale-ups – those female-led businesses that are firmly on the journey to success – because only then will we create the role models needed to show the scores of women, old or young, who have a vision, an idea and a brain that the impossible is entirely possible. Female-focused funders Diversity VC A not-for-profit partnership that is focused on promoting diversity within the venture capital community. It is working with investors from across the business spectrum to create an industry that is free from bias. It provides resources and tools for both start-ups and the investor community. www.diversity.vc SAP.iO The SAP.iO Fund has committed to investing up to 40% of its investible capital in women and minority entrepreneurs as part of its No Boundaries campaign. Its goal is to help more than 200 start-ups over the next five years. www.sap.io The Billion Dollar Fund Launched by Shelly Porges and Sarah Chen, the Billion Dollar Fund has set itself the goal of bringing together a global consortium to raise and invest $100m in female entrepreneurs by 2020 and $1bn collectively within the next decade. https://thebilliondollarfund.org To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette Main photo: Monkey Business/REX/Shutterstock