These entrepreneurs have always had to compete more fiercely for funding, a problem that many in the financial industry have yet to address.
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The author co-founded a start-up that promotes digital literacy. both Decoded and The Alison Rose Review of Female Entrepreneurship have members on their boards. A 52-page memo titled "Adapting to Endure" was published in May by Sequoia, one of the most well-known venture capital firms in the world. The message was clear: Rest in peace, happy days. The days of easy money are gone, and now the emphasis is on profitability rather than growth. The note emphasized that expenses must be reduced or a death spiral will occur. Even after these adjustments, the healing period will be protracted.
The memo shook up the tech community. Venture funders stopped their checkbooks, and entrepreneurs started to brush off the survival skills they had learned during the 2009 recession. One group, however—female founders—has since appeared to be largely unconcerned on Twitter, the tech industry's town square. Female innovators who were collecting money before the revisions aren't shaken, according to Brittany Fuller, co-founder of the data analytics startup Notably. For us, the financial environment is standard.
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. Fuller's perspective is grounded in truth. The UK experienced a banner year for venture capital in 2018, with total deal value rising from $12.8 billion in 2020 to $32.9 billion in 2021. In addition, 140,000 enterprises with female founders were launched in the past year, beating the previous record.
Nevertheless, despite this development, fewer than 1% of venture capital investment is still allocated to female founders, according to the updated data from this year's Rose Review of Female Entrepreneurship.
Many of the venture capitalists I deal with respond that they do not see the amount and quality of start-ups they require in order to invest at scale when I ask why this cohort is receiving so little money. Please make use of the sharing options available through the share button located at the top or side of articles. Copying articles to distribute to others is against FT.com's terms of service and copyright policy. To purchase more rights, send an email to [email protected]. Using the gift article service, subscribers may share up to 10 or 20 articles each month. You can learn more at https://omnil.ink/Itsonly5
However, the Alison Rose-led Rose Review reveals additional contributing causes. It notes how informal networks influence funding access. Since less than 15% of venture capital partners are women, it may be difficult to see the market potential of, for example, a fertility app or a fashion rental company (just two of the female-founded businesses I encountered trying to raise capital this year).
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It is also telling that for debt financing, including government and bank loans, there was no notable difference in the level of finance approvals for businesses led by women and men (90 per cent and 92 per cent respectively). These routes often feature relatively straightforward online applications, and do not require founders to have a network, pitch in person or even necessarily disclose their gender.
The review stresses that conscious and unconscious bias must be challenged, and that venture capital can do better. Gender equality is not the only reason to work on changing the system — there is an economic incentive as well. Calculations show that if women started and scaled their ventures at the same rate as men, £250bn worth of business would be unlocked for the UK. For a country entering a recession, this is not a figure to sniff at.
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While there is no single solution, it is clear that data can be a powerful force in understanding the issues. Last month, the group behind the Rose Review launched the Investing in Women Code, which asks the UK’s venture capitalists to provide data that will be aggregated and published annually, and to nominate an internal representative who will support equality in access to finance. Over 160 banks, investors and financial institutions have committed already, but many of the biggest names in venture capital are still missing.
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Encouraging more women to start businesses and not providing them with adequate capital for growth is like sending talented novice mountain climbers up Everest without oxygen, a guide and a tent. Few will make it to base camp, and for those that do, the odds of survival are even lower.
Still, when this recession subsides, we may find an unusually high percentage of female founders among those who remain. After all, they were forced to adapt to such harsh conditions a long time ago.
It is also telling that there was no discernible difference in the amount of financing approved for enterprises led by men and women when it came to debt financing, including government and bank loans (90 per cent and 92 per cent respectively). These paths frequently include relatively simple online applications and don't demand that founders have a network, give a live pitch, or even necessarily reveal their gender.
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The assessment emphasizes the need to confront both conscious and unconscious bias and the potential for improvement in venture capital. Working to alter the system is motivated by more than just gender equality; it is also motivated by economic considerations. According to calculations, the UK would have access to £250 billion in new revenue if women launched and expanded their businesses at the same rate as men. This is not a negligible number for a nation that is about to enter a recession.
Although there isn't a single answer, it is obvious that data can be a strong tool for comprehending the problems. The organization behind the Rose Review last month unveiled the Investing in Women Code, which requests information from UK venture capitalists that will be combined and released annually as well as the designation of an internal representative who will encourage financial equality. Although more than 160 banks, investors, and financial institutions have already committed, many of the major venture capital names are still absent.
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It would be like to sending skilled amateur mountain climbers up Everest without oxygen, a guide, and a tent to encourage more women to launch businesses while failing to provide them with sufficient funding for growth. The chances of survival are even fewer for those who do make it to base camp.
Even so, among those who remain when this crisis ends, we might find an abnormally high proportion of female founders. After all, they were made to acclimate to such challenging circumstances in the past.
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