The Challenges of VC Funding for Female Startup Founders
A measly share of funding, stereotypical quips and prostitute jokes are just some of the problems facing female startup founders, DIGIT reports.
“Raising money is a full-time job for all founders, but it definitely isn’t a level playing field for female founders,” says Vicky Brock, co-founder and CEO of Get Market Fit.
“It probably says everything about my experiences that in my latest new venture, I have no intention of raising early stage investment. We’re self-financing and revenue generating to avoid the paralysing time and energy drain of raising equity funding.”
DIGIT spoke to Brock to discuss the ongoing issues surrounding venture capital funding for women, as statistics published this week highlighted a concerning disparity in venture capital investment for male-led and female-led startups in the UK.
Female-led startups receive just one penny for every £1 invested in the UK, according to the report published by DC Ventures and the British Venture Capital Association (BCVA).
Of the UK’s available capital, female-founded teams receive less than 1% of investment, while 89% is invested in male founders – the remaining 10% of capital is invested in mixed gender teams.
This lack of investment means female founders and entrepreneurs across the UK are potentially missing out on billions of pounds in funding every year; meanwhile, companies with no founding female team members account for around £5 billion.
Based on investment rates, it could take more than 25 years for all-female founder teams to boost their share of VC funding to the ten pence range. Can the industry, and the economy as a whole, really afford to wait this long for things to improve?
Commenting on the report’s publication, Liz Truss, the Chief Secretary to the Treasury, said Britain needs “more investment going into startup ventures and more women putting businesses forward”.
Truss notes that it is in everyone’s interest that the “financing processes are open and meritocratic to grow the economy and make use of all the talent we have”.
For many women in business, however, raising money is a minefield littered with parochial views, gender stereotypes and discrimination.
A Restrictive Environment
Brock believes the current environment isn’t helpful for female entrepreneurs and is restrictive to the development of individuals, companies and the sector at large – outlining three particular challenges that female founders are faced with.
Unconscious bias is an area of particular concern, Brock explains. She believes that naturally, people seek out and favour people like themselves.
“This is why you see such a lack of all kinds of diversity in investments – be it racial, gender, social etc,” she says. “When people have been to the same schools and colleges, played in the same teams, been introduced to the “right networks” by family and connected friends, the focus gets narrower and narrower.”
Brock suggests that when a different type of founder offers solutions to a problem “that is not in the narrow worldview of a particular group of privileged male investors”, they have little chance of success due to a lack of immediate recognition or emotional connection.
“That’s why you see multiple boy toys like scooters and drones being funded, whereas female reproductive health tech, for example, doesn’t get through the door; despite being the far bigger market opportunity.”
This lack of emotional attachment – or basic interest – has a negative impact both on women in the technology industry as a whole and those pitching products or ideas focused toward women, Brock insisted.
“While raising money for my last business, which was about retail returns, I had male investors flat out refuse to believe that returns were a thing, or that people bought things they didn’t intend to keep.
“I actually used to welcome when there was a guy in the room who rolled his eyes and said ‘my wife does that, we have non-stop packages coming and going again’ because at least that way there was a point of common reference.”
Ultimately, Brock ended up with around 50% of her angel investors being female, which helped develop an understanding that a particular product or solution was worth investing in.
Women, Brock also believes, are held to different standards than their male counterparts and during the fundraising process they are treated in a different manner – or asked different questions.
“There is some great Harvard research that shows VC’s ask male entrepreneurs questions with a promotion orientation, which means they focused on hopes, achievements, advancement and ideals,” she says. “But when questioning female entrepreneurs they embraced a prevention orientation, which is concerned with safety, responsibility, security and vigilance.”
Brock says she has experienced this same issue during her career and that it had a huge impact on her ability to raise money.
“I really recognise this, I had it whenever and where I raised money and it has a huge impact on the sums you raise and the time it takes to raise,” Brock says.
Crossing the Line
Emotional attachment isn’t the only issue affecting female founders, she asserts. Highly unprofessional conduct, which often verged on ‘creepy’, was a common recurring theme.
“I’ve raised equity investment as a startup, especially for my last firm, which was backed by angel investors over multiple rounds, and I have done the endless process of pitching, follow up, VC meetings and those occasional creepy meetings where it quickly becomes apparent you are both there for very different reasons,” Brock explains.
Antiquated and inappropriate views held by people in the industry impact female entrepreneurs immensely, she says, which merely serve to perpetuate stereotypes and restrict exciting, innovative ideas and people.
“You hope and expect that it is a professional discourse, and yet it so often crosses the line,” she says. “Both I and my wider network of female founders have heard pretty much everything, from prostitute jokes to being told they don’t invest in husband/wife teams due to ‘pillow talk.'”
To help tackle these issues, Brock insists that male figures and colleagues within the sector must take proactive steps to support their female counterparts.
“Men in the room need to learn to call out, and support each other in calling out, the unacceptable behaviour of the powerful men who abuse this position,” Brock says. “Because it isn’t acceptable, ever, and the person raising money can only take so much on the chin.”