Is tech investment sexist?

The #movingforward movement has started to shine a light on inequality in tech investment but it will take an industry-wide, multifaceted approach to address discrimination in fund raising.

"My worst moment was when an investor blatantly invited me to visit his hotel room to discuss a potential deal," says Gemma Lloyd, co-founder and CEO of Work180, a jobs network and recruitment platform for women in the workplace. "Female entrepreneurs still get a raw deal from investors, with discrimination taking different forms," she adds. 

Given that two-thirds of women feel they've not been taken seriously by potential investors when raising money for a new venture, according to IW Capital, and that just nine percent of UK start-up funding goes to women-run businesses, Lloyd must have a point. In February, research firm Pitchbook found that women took home close to 1p in every £1 of all start-up funding last year.

"Then there's the less obvious discrimination," continues Lloyd. "One time, after presenting to an investment firm, one of the investors rang me up afterwards to apologise when he realised that I'd had been subjected to a tougher round of questioning compared to the male founders that had presented to them on the same day. I was completely unaware at the time of the unconscious bias I was being subjected to, so it begs the question, how many other times did this happen to me and are other female founders being treated in the same way without their knowledge?"

The short answer is yes. Kim Nilsson, founder and CEO of Europe's biggest data science hub, Pivigo is one of many similar stories. Like Lloyd, discrimination for Nilsson has manifested through stereotypical perceptions of her as a woman and the way in which she presents. Woman first, entrepreneur second.

"You operate in a bit of a minefield when pitching to investors," she says. "If you are too bullish and confident, then you are perceived as naïve or aggressive, and if you are too conservative, you are deemed to have low levels of confidence, both of which will prevent you from receiving investment. You also very quickly get accused of being "emotional" in your communication and decision making. All this can make you can feel as though you are walking a tightrope, trying hard not to be your authentic self in order to get your business funded."

It's the sort of scenario that has angered so many women entrepreneurs and rightly so. In the US last year, it fuelled the birth of the #movingforward movement, the VC world's answer to #metoo. It's now launched in Europe, Australia and New Zealand and is a place for VC transparency on discrimination and equality.


What can be done to address the issue?

It's a welcome and positive step but for many entrepreneurs the problem will not really go away until there are more women investors. Unsurprisingly there is no gender balance in VCs. They are male dominated but so is the entire tech industry. Women in tech are outnumbered four-to-one, according to Tech Nation, so, for the moment at least, it's a bit chicken and egg. We need more women tech entrepreneurs to increase the likelihood of more successful earnouts and therefore more women in a position to re-invest in tech.

The UK Business Angels Association (UKBAA) found that over half (54 percent) of female angel investors had backed at least one female-founded business whilst only a small minority of male investors had done the same. So, it's been slow progress. Back in 2016 the CBI released a diversity report claiming that increasing female employment and productivity to the levels of men is estimated to be worth 35 percent of GDP. That's a huge amount of money but it's a statistic. It requires energy and ingenuity in overcoming the many hurdles. Lloyd suggests something a little more radical.

"The investment industry's culture needs to change, with a shift in the balance of power between male and female investors," she says. "More women should be encouraged to work at Venture Capital firms and VC's should undergo unconscious bias training."  

It's a good idea. Research from the British Venture Capital Association, Diversity VC and reveals that half of the UK's venture capital firms do not have a single woman in their investment teams, let alone at key decision-making partner level, where the absence statistic lies at over two-thirds.

Nilsson agrees that having more women investors, as angels and VCs is of course important, but she also suggests a change in how ideas are presented, at least initially, to circumnavigate any potential bias.

"Blind pitching could be interesting," she says, "similar to sending CVs without a name or gender on them. I also think women need better mentoring and coaching, to come across as confident, as they need to be. In general, I think women, on average, are not confident enough."

There are however some green shoots of change. Despite a recent global survey from 99Designs of more than 3,000 entrepreneurs, which found a significant funding gap between genders still exists when compared with 12 months ago, Jo Dalton, entrepreneur, investor and founder of one of Europe's leading executive search agencies JD&Co sees some improvement.

"The tech sector in the UK is improving when it comes to female founders," says Dalton. "Approximately 15 percent of the JD&Co client base is female founder-led businesses.  A year ago, this number was about 2 percent and two years ago, zero."

It's a positive indicator and can only enrich the tech start-up sector. Understandably there are some considerable hurdles to overcome and anyone that succeeds against the odds, regardless of sex or creed is worthy of admiration.

Jenna Brown, co-founder and CEO of Shipamax, and a latest Forbes 30Under30 recipient in 2018 European Technology, started up the business in 2016 after she worked at GoCardless as one of their first employees, during a huge transition of growth. Jenna claims gaining funding was one of the hardest milestones.

"VCs questioning whether you can win in your industry based on your gender," Jenna recalls, "is a rhetoric that totally needs to change." In hindsight, she says she would definitely call it out in future but that comes down to confidence, knowing the ropes and being safe in the knowledge there are alternatives.

For Jenny Tooth CEO of UKBAA, more women need to play the men at their own game.

"It's an old trope: men are cavalier with money, women are cautious," she says. "I'm usually reluctant to go along with generalisations, but when it comes to the pitching room, I find that female entrepreneurs do undersell themselves; asking for just enough, or even less investment than they need. I hear myself saying: "Are you sure that's all?" Whereas with men, I'm met with outrageous requests. The truth is that neither approach inspires confidence in investors. But the trouble women face is that they are walking into rooms filled predominantly with men, for whom a cautious approach may be a red flag. Have a growth plan, work out how to execute it, and remember that investors are not the enemy. This will help to inspire the next generation of entrepreneurs and business leaders to promote women in business and good equal practices."

Research from organisations such as McKinsey, PwC and Female Founders Forum consistently supports the idea that there is a diversity dividend, typically around 15 percent in higher financial returns. Commercially alone it makes sense to support more women through the start-up process. While the majority of male-based VCs may recognise this, there will always be a minority who stick to old school ideas of discrimination but money talks. For women considering embarking on a funding process there is increasing support but for inspiration look no further than the list of names on the Female Founders Forum to realise what can be achieved.