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When Esther Crawford was trying to get early stage investors interested in Squadapp, a screen-sharing chat app she founded aimed mainly at teenage girls, she attended a founder and investor event. One male investor she pitched to suggested they meet at a café. When she arrived she pulled out her laptop with her financial presentation on it. “He said: ‘Oh, you’re pitching me. I thought we were meeting up to get to know each other.”
The experience is familiar to many female entrepreneurs who are trying to attract funding. Early stage venture capital is still dominated by men. Women make up just 13 per cent of decision makers in venture capital in the UK, according to a 2017 report from Diversity VC. Female founded companies get less than 1 per cent of total UK venture capital, while male founded companies get 89 per cent, according to a February study by the British Business Bank. That is despite the fact that a third of entrepreneurs in the UK are female, according to the Rose Review published in March.
In the US, companies founded solely by women received just 2.3 per cent of the total capital invested in venture-backed start-ups, according to Pitchbook. Yet a Boston Consulting Group report last year found that companies founded or co-founded by women generated by 10 per cent more revenue on average over a five-year period than male-founded companies.
Now things are changing. Female founders are taking matters into their own hands. They are increasingly seeking out female investors, while women experienced in the venture capital scene are setting up new networks and encouraging women to learn about angel investing: the private form of early stage investment before a founder turns to a professional venture capitalist.
Emma Sinclair, who co-founded Enterprise Alumni, a corporate alumni management platform, recently completed a round of funding for her company that was backed 50 per cent by women. “Finding female investors was a labour of love,” she says.
The hope is that, as a greater pool of investors comes into the angel investing space, it will bring more diversity and less sexism.
Robyn Scott, co-founder of Apolitical, a platform that helps governments from different countries share ideas and is also 50 per cent female-backed, says that the issue is not men as such, but that “right now, there aren’t a lot of women investors or inclusive male investors. And given fundraising is often a numbers game, women founders are forced to go to the sexist jerks”. She adds: “Compounding the problem, there aren’t that many women raising, so an investor isn’t losing out on lots of great deals if he behaves like a jerk. But as the space becomes more competitive — with more women founders bringing great deals to more civilised investors — the deal flow to jerks will dry up,” she says.
Scott adds that while she was fund raising when pregnant last year, at least one potential investor asked whether it was a planned pregnancy. The implication was that getting pregnant had somehow been irresponsible of her. “The idea an investor would think I can run a company but not plan a pregnancy was so infuriating and bizarre,” she says.
Sarah Turner founded angel network Angel Academe in London in 2014 to invest in tech companies with at least one woman on the founding team.
“Most of the women we’re investing in have stories about some sort of bias including real #metoo incidents where they think they’re meeting an investor and they think it’s a date over a drink,” she says. “None of those laws around gender discrimination can be applied as you’re dealing with people investing their money privately.”
Angel Academe now has 400 registered investors in the network, 80 per cent of whom are women, and runs workshops for new investors as well as pitch events.
Angel investors in the UK are required by the regulator to have a salary of at least £100,000 a year or £250,000 in investable assets as it is relatively high risk and capital may be locked away for seven-10 years — until the founder sells or lists the company. Turner said that when she started angel investing she was often the only female in the room and the experience was not particularly collaborative.
“I’ve been in rooms with men and you see their eyes glaze over when a woman comes to the stage. I thought I could do something that would work better for women. No one person knows everything — it was about having a group around me who I wanted to invest with and it’s grown from there,” says Turner.
Female founders and investors believe that unconscious bias also plays a role, particularly for those in the tech space. While there are hugely successful female founders with billion dollar companies, such as Katrina Lake, founder of Stitch Fix, or Sara Blakely, founder of Spanx, often they are from the fashion industry, an area that is stereotypically associated with women. Turner points out that the most successful tech founders — Mark Zuckerberg at Facebook, Larry Page and Sergey Brin at Google — were young men, so investors are perhaps unconsciously looking for people that fit that mould.
“There are such amazing women rock star entrepreneurs that are being undervalued,” says Suzanne Biegel, the founder of Catalyst at Large, which focuses on gender-smart investing and improving women’s access to capital. “It’s the unconscious bias of: you don’t look like the last 10 guys I invested in.”
Biegel argues that failing to seek out female founded companies means early stage investors are limiting themselves. “Knowing that as an early stage investor some of your businesses will fail, you want to be diversified. It’s smart business. You’re cutting off your opportunity set.” She also recommends that people starting off as angel investors get involved with a group where they can pool their knowledge and skills. “It’s hard to be a successful angel: it’s an easy way to lose money. If you’re going down this path you want to be around other smart people to look at this with you.”
Venture capitalists tend to ask male and female founders different types of questions, a study by academics at Harvard and Columbia Business schools found. Male founders were more likely to be asked about the potential for gains and women about the potential for losses. But if women reframed their answer to focus on gains, they were more likely to secure funding. Venture capitalists also used “radically different” language to describe male and female entrepreneurs, according to a Swedish study published in the Harvard Business Review in 2017. While a male entrepreneur would typically be described as “young and promising”, a female was described as “young, but inexperienced”.
Lucy Lloyd, co-founder of Mentorloop, a software company that helps companies to organise mentoring programmes, recalls a male venture capitalist in the US asking how old she and her co-founder were and whether they had children. “He said they wouldn’t invest if they knew one of the founders was pregnant as it’s too much of a risk,” she recalls.
“At the time I was like, well that’s good to know: we either need to not get pregnant or hide that we’re pregnant if we’re looking for capital. But the more I reflect on it I realise it was ridiculous as VCs deal in risk and I’d say a pregnant co-founder is pretty much at the bottom of the risk pile: everyone knows what the outcome will be,” Lloyd adds.
Others say there are far worse stories that they do not feel comfortable sharing publicly as they are still trying to seek funding. “There’s one guy, everyone knows who he is, who we call the boob-grabber,” says one founder. “Once we’ve exited and made our money, then we can talk more. But for now, it’s too risky.”
Another adds: “You do feel this obligation sometimes that you should call everything out for the next people coming along but you’re in that pragmatic mindset of moving to the next step.”
Maren Bannon, cofounder of Jane VC, an early stage venture capital fund that invests in female-led start-ups, recalls that her male colleagues at Stanford Business School had a culture of networking that saw them invest in each others’ businesses, while the women were missing out. As a result, her fund has scrapped introductions that start-ups usually need to find funding. “It’s a very network driven industry and we feel that’s left the women and the diverse out,” she says. “We’ve said just pitch us directly: we want to hear from you.”
Start-ups with an introduction to a VC were 13 times more likely to get funding than those without, the British Business Bank study found.
“We hear over and over that we’re the first female investor that they pitched. A lot of our excitement about starting this fund in 2018 was that it felt like there was a tipping point with people becoming more aware of it. We have a long way to go but we’re optimistic that the more female investors there are the more progress we can make,” Bannon says.
Marisa Drew, head of impact investment at Credit Suisse and an angel investor in her spare time focusing on female founders, says: “I’m a woman who has grown up in financial services and have always believed I’ve been very fortunate in my career and I have an obligation to give back to the next generation. If I put my money where my mouth is and invest in women then I can hopefully be a catalyst for creating some success stories.”
Jodie O’Keeffe, one of the investors in Angel Academe, says: “There’s a whole bunch of women out there with great ideas but can’t get them off the ground as the industry is male dominated. Eventually we’ll get to change the whole landscape.”
O’Keeffe thinks that as a female investor she does more personal research on founders, such as calling customers and asking what it’s like to work with them. “At male dominated pitch events a lot of the discussions went straight to valuations, it was a lot about the numbers. We’ll think more about who the founder is.”
Female founders say they are seeing a difference in the investor mix in recent years. Esther Crawford says the difference in just two years between her funding rounds in terms of women in the room has been “pretty stark”. Two years ago, she doesn’t recall a single women being in her pitch meetings. This time round, she estimates that women are present at a fifth of the meetings.
Jessi Baker, founder of Provenance, a blockchain company that enables ethically minded consumers to research business supply chains, says: “Pitching to a whole room of male investors, you can’t help feeling like an outsider or an anomaly. When you’re doing a start-up everyone is an anomaly as you’re trying to do something outside the status quo. Then not only am I crazy enough to quit my job and build a product that hasn’t been validated before, but standing in a room where I am the only woman as well. It’s a combination of the two. In past jobs if I presented to a room of men it didn’t matter.”
Alina Lapusneanu, founder of Fiskl, a software company offering mobile funding for small businesses, recalls one male investor asking who prepared her financial presentation for her. “It’s not necessarily mean but they’re a bit surprised as some of them are finance guys,” she says.
She says she noticed female angel investors, particularly those looking to invest smaller amounts of £20,000, asking “way too detailed” questions, partly because the investment process was new for them.
“They don’t know to look at the meaningful things, they ask about forecasts three years in the future rather than looking at whether this distribution model works,” Lapusneanu says. This did not happen when she approached sophisticated female investors, she added. She theorised this could be due to a relative lack of experience rather than a gender difference. “Women generally don’t manage money closely and I think that makes the percentage of female investors smaller and less comfortable, unfortunately.”
Seb Dovey, one of the male investors at Angel Academe, says female founders tend to do more work on the company before asking for money, he says. “Female founders appear more likely to come with the same business idea as a man but only after they’d had 10 invoices, where the male-dominated team would come without even the software to produce it.”
Kate Glazebrook, cofounder of Applied, a recruitment platform that removes hiring bias, says: “I definitely think that the experience of pitching to lots of male investors at a particular stage in your career creates an environment where you don’t feel you belong. There’s a sense you stand out for being the female founder rather than because of your business.”
But she adds: “One thing I think often gets missed in these discussions of this stuff is it’s not always the case that men are particularly more biased against women than women are: the feature is the world is biased and we all absorb those biases unconsciously. The key to overcoming them is making sure we design our environments to remove the risk of bias affecting our decisions.”
Jessi Baker says she did not see any difference between male and female investors when pitching. Rather, she felt that the female angels she pitched to did not want to be lenient with her and asked tough questions, “which I think is the correct attitude”.
In fact, most of the female founders interviewed said that they were wary of drawing strict differences between male and female investors. The point, many believe, is to achieve a greater diversity of people supporting early stage companies. And female founders also point to a growing number of male investors who see the benefits of expanding their investment horizons.
Adam Parr, former head of Williams F1 and now an active tech investor with a portfolio of start-ups, is a stakeholder in female-founded Apolitical. “I would feel so proud and love to be a founding investor in the first all-female board of a FTSE company as it is so rare,” he says. “We have a massive under-representation of women in this eco system of start-ups and spin outs.”
Dovey says: “Whenever I explain what I’m doing to a large proportion of the male investment community they’re like, oh that’s interesting, why would you do that? Then they say: well how do I access this space?”
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