Before becoming Prime Minister, Liz Truss launched a new “Taskforce for Women-Led High-Growth Enterprises” whilst she was Minister for Women. It is a very welcome initiative and one of many that emerged in recent years with the aim to support female entrepreneurs. We are yet to see what exactly the taskforce will do, but this gives us an occasion to contemplate what issues they should tackle to really make a difference.
As the most active UK investor, it is in SFC Capital’s interest to see more female-led companies that raise funding. Females make up half of all society, and there is no reason why they should not represent half of all entrepreneurs. Entrepreneurship is about bringing new, enhanced products and services to customers and creating businesses that then employ individuals and pay taxes. As half of all customers are also women, again, we expect that new services and products will be brought to them by other women who can better understand certain needs and situations.
It is great to see that more is done at the state level, and we could not agree more with Anne Boden, who will be a part of the taskforce and says: “More women than ever are starting new businesses and many of them are scaling-up their companies. The Taskforce aims to give women entrepreneurs the tools to take their businesses to the next level: access to finance and growth capital, technology adoption and leadership skills.”
Yet, the 2022 Investing in Women Code’s annual report’s conclusions are alarming: “This year’s report gives a clear picture of the funding journey for women, and the very different markets for debt and equity finance. Across both lending and equity finance, far fewer female-led businesses and all-female founder teams sought funding than their male counterparts did. While just over half of customer applications for a standard loan or overdraft came from male-led businesses, only 13% came from women. On the angel side, all-male founder teams accounted for 43% of pitch decks received, compared to 17% from all-female teams. And the disparity is even more dramatic for venture and growth capital – 64% of pitch decks for VC funding came from all-male teams, with just 12% coming from all-female teams.” The full report is available here.
At SFC Capital, we welcome all efforts to support women in business, but at the same time, we want to be clear that investing is about backing opportunities that can bring the best return to investors while providing enhanced products and services that are aligned with wider needs in the surrounding world. Our own experience is that there are not enough female entrepreneurs and far fewer of them ask for funding. Still, our portfolio has more female-led companies than those of other early-stage investors.
We surveyed a number of female founders and businesswomen, many of whom we backed with investment, about their own experience and what they think is missing and could be done to improve the situation. As they are at the early stages of their business journey, the most crucial aspects to understand are the challenges of starting and running a business as a woman, it feels that their voice is particularly important and needs to be heard.
All of them felt that if it comes to business life, they were treated differently than men and that was because of their gender. The two most difficult aspects in their entrepreneurial journey were “fundraising/managing investors” and equally “balancing private and business life” (each option was selected eight times, twice as much as the second aspect from the list). The businesswomen we spoke to clearly indicated that the following three things would make a difference:
- More private funding dedicated to female founders
- More entrepreneurial education at school/university
- More visibility in the media of female entrepreneurs
When asked about the group of influence that had the biggest impact on the underrepresentation of successful female-led startups, our interviewees indicated ‘investors’ and the enigmatic ‘other’, different options were also selected by the interviewees. This suggests that we are dealing with more complex and complicated issues – which may not be fully uncovered yet.
Generally, while facing gender specific issues and problems, our interviewees do not complain about general business challenges and feel they are the same or similar for both female and male founders. This is clearly a view of Dr. Henrietta Boyd, the CEO of Halocycle, a biotech company resolving a problem of plastic waste. Her responses to our questions show that her experience in business and fundraising was not determined by her gender, however non-business aspects of life would play a role in helping or hampering the entrepreneurial growth.
As Candice Hampson, the CEO of Kiteline Health notes: “There is the obvious challenge of managing maternity leave when you are a founder. A baby is physically dependent on the mother for quite some time and leads to very little sleep = not the best headspace to run a business for a good 6 months to a year. That is a challenge. Getting good mat cover while away is essential - something I couldn't last time around due to circumstances.”
Julianne Flesher, the CEO & Co-founder of Nossa Data, also mentioned this issue: “I had a baby while fundraising our seed round. While having a child is hard for both mothers and fathers, the burden hits mothers a lot harder. As a founder of an early-stage business, I felt I needed to take the shortest maternity leave possible”. When talking about the deeper roots of underrepresentation of the female founders, she notices they go beyond day-to-day practicalities: “The biggest thing female founders need is more role-models. There are still very few female founders compared to men, especially as you get to later stage rounds of financing” and “History is the biggest blame factor, the struggle that over time women have not been expected to start the world's largest businesses.”
Lara Morgan, a serial entrepreneur, investor, and mother also indicated the pre-business factors and certain aspects of life that surround business as those playing vital part in underrepresentation of female founders. While she thought that all aspects of starting and running a business were equally challenging for men and women, she did experience gender discrimination when applying for bank overdraught access. In her responses, she paints a better picture of the huge role that parents, education, childcare support system and media have on bringing up more successful female entrepreneurs.
Beren Kayali, Co-founder, Director and CTO at Deploy Tech, who openly talked about huge differences in how she and her male co-founder have been treated, in response to the question about the ways to democratise access to capital for female founder says: “Advertising and idolising more female-led or founded businesses. I think the media has a big influence on everyone. Creating role models and idolising, advertising, supporting successful women in business would be the strongest move in my opinion. We can create defenders for those role models and educate younger generations to respect women in business. Similar to what Marvel movies have been achieving by creating movies about female superheroes”
As a leading early-stage investor, we were particularly interested in knowing how funding is viewed by female founders. The responses we received clearly indicate that female founders get different behaviour when quizzed by investors. They are asked different questions, or the same questions are framed differently. Mehrnaz Tajmir, co-founder and Chief of Science at Greener.io said: “For example, while my male colleagues would get asked about the strategies on how they can drive their business to success, similar questions were framed from the perspective of failure towards me. Say my male colleagues would get asked about the "monetisation strategy" whereas I would get asked "how to get users to pay". There are very subtle differences between the two. While the former makes the founder think positively towards their vision of the business, the latter puts the founder on the back foot and makes them defensive as it addresses the failure scenarios of the business instead of the vision, strategy, and bigger picture. I have only become aware of this very recently and it has been an eye opener in the way in which I address such questions by directing them towards strategy-driven answers and success scenarios. What matters to me is the success of my business and my role within it and I would do anything in my power to eliminate any other biases that may jeopardise that success.”
Many female entrepreneurs notice that while male founders are asked about their ambitions and visions, questions to female founders focus on challenges and potential issues. Ming Zhao, co-founder of Cauli, notices: “Our competitors all have all-male founding teams and they raised between $2-7M based just on an idea when starting out. Investors obviously would never mention gender, but I felt women need to validate themselves a lot more to prove that they are investment-ready. We get asked different questions, particularly surrounding 'mitigating risks', 'too early', whereas many male founders seem to be asked more about their 'vision', 'aspiration'. Unfortunately, there were occasions I felt like I needed to 'act like a man' particularly in terms of how I talk.”
Also, the way men and women respond to the same question will be interpreted differently. Mehrnaz Tajmir suggested it had to do with tokenism and unconscious bias and said: “I find it challenging to navigate constructive criticism from outright sexist comments. For example, being criticised for coming across as "too argumentative" when male founders with similar mannerisms would be ones that are "tough" and "fighting for what they believe in". I also found it challenging to navigate whether I was being included in discussions just for being a female founder or my skills and expertise as a female founder.”
In terms of fundraising, female founders we spoke to would like to see the investment process being clearly defined and transparent, and partially or to some extent – blind. In this manner, businesses are assessed in the same way and female and male founders receive similar questions. They also notice that prioritising warm introductions over cold inbound applications might be discriminating as there are more male investors and entrepreneurs who network and can take advantage of it. Our interviewees noticed that decisions are often made by all male committees or often in informal set ups that suit male candidates much better, e.g. over a drink in a pub or at a sporting or social event, which often exclude females or could be seen as inappropriate or unsafe.
Our interviews provided us with the following conclusions, which we hope will be also noticed and tackled by the Taskforce for Women-Led High-Growth Enterprises launched by Liz Truss:
- Female founders do not feel victims in business and in their views, they are generally facing similar business challenges as their male counterparts, they are not seeking special help (or mentoring) with that, they can deal – sometimes better than male peers – with various business challenges.
- They do feel however that they get different treatment and for reasons related to gender and must navigate through extra complexities. Many of them are unclear, perceived or sensed during the process.
- Dedicated funding (public and private) was indicated as one of the stand-alone solutions to support more female founders; more females in investment committees and in prominent positions would also be helpful.
- Much more can be done on other fronts, for example through media, by giving more exposure to successful female founders and by creating female role models and a clearer picture of female entrepreneurs that younger generations can look up to.
- A lot of female founders struggle to balance private life and their business lives, and notice that childcare is a big issue that stops them from dedicating enough attention to their ventures. Having more practical support but also changing the general perception that it is a female thing is a challenge that must be tackled collectively, and everyone has a role to play in this.
Unconscious biases and non-intended behaviours are widely spread – transparency in the process is a must to reduce them, however deeper changes in how society approaches feminism and masculism would make a more long-term change, this can happen with better education and ways of upbringing boys and girls, the future investors and entrepreneurs.
