Business is booming.

Female entrepreneurs may cope better in harsh investing climate

[ad_1]

The writer is the co-founder of digital literacy start-up Decoded and sits on the board of The Alison Rose Review of Female Entrepreneurship

In May, one of the world’s most prominent venture capital firms, Sequoia, issued a 52-page memo titled Adapting to Endure. The message was clear: RIP the good times. The days of cheap cash are in the past and profitability, rather than growth, is now the focus. Costs must be cut, the note stressed, or a death spiral will ensue. And even after these changes, the recovery will be long.

The memo sent a chill through the tech world. Venture capitalists closed their cheque books and start-up folk began dusting off survival skills acquired during the 2009 downturn. But on Twitter, the town square of tech, one group has since appeared largely unfazed: female founders. Brittany Fuller, co-founder of data analytics start-up, Notably, summed up the mood: “Female founders who were raising before the corrections aren’t shook. This is funding climate as usual for us.”

Fuller’s take is rooted in reality. Last year, the UK recorded a bumper year for venture capital, with $12.8bn total deal value in 2020 soaring to $32.9bn in 2021. The past year was also record-breaking for female-founded businesses — 140,000 companies were established in that category. But despite this progress, the revised data from this year’s Rose Review into Female Entrepreneurship revealed that female founders still receive less than 1 per cent of venture capital funding.

When asked why this cohort is receiving so little funding, many of the venture capitalists I speak to claim that they do not see the quantity and quality of start-ups they need in order to invest at scale.

But the Rose Review, led by NatWest CEO Alison Rose, highlights other factors at work. It records that informal networks affect access to funding. Less than 15 per cent of venture capital partners are female, which is likely a hurdle in grasping the market potential of, say, a fertility app or a fashion rental business (just two of the female-founded businesses I encountered trying to raise capital this year).

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.

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.

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.

[ad_2]

Source link