How A Lack Of Senior Women In VC Hinders Female Founders

I’ve worked in the European fintech industry for over ten years, and I can say, without hesitation, that it employs fewer women than men. That’s especially true when you look at company founders.

Tired, Inaccurate Excuses

The most common excuse for this is that fewer girls take STEM (science, technology, engineering or math) subjects at school and therefore fewer women go on to work in the finance and/or technology industries. As a result, the logic goes, there are fewer women interested or experienced enough to want to start a fintech company.

Various reasons are given for the STEM question, from a lack of interest or confidence among girls, to the more problematic suggestion that they are naturally “worse” at these subjects. But the reason for this situation is irrelevant — it’s not the answer to the question of why there are fewer women founders in fintech.

For a start, the issue of STEM experience is only true in some places. In many countries, particularly in Eastern Europe, the percentage of women graduating with degrees in STEM subjects or working in STEM industries is higher than it is for men. In Lithuania, for example, 57 percent of engineers and scientists are women.

But the more important point is that while it’s helpful for founders to have experience within the fintech industry, it’s not essential. The core requirement for starting a successful business is spotting a problem and working out how to solve it in a better way than anyone else is doing.

The Answer Is Always Money

I asked Nina Mohanty, founder of ethical savings fintech Bloom Money and holder of extensive fintech industry experience working for both Mastercard
MA
and Klarna for her opinion, and her response was simple.

“I’ve thought about this so many different ways [and] the answer is absolutely money,” Mohanty says.

Startup businesses need resources to get off the ground, whatever industry they are in, and in most cases that means more money than founders have lying around, requiring them to seek external sources of capital. In other words, external investors. However, women-founded companies receive just a tiny percentage of total venture capital (VC) deployed every year. In 2021, women-led startups in Europe got just 1.8%, which was down from 2.7% t in 2020.

So why do women, even those with qualifications, industry experience, and a brilliant idea, struggle to get VC investment?

Look At Who Writes The Cheques

Despite Mohanty’s connections and fintech experience, she still faced hurdles unlocking investors’ funds. She explained that, while she received interest from a significant number of VC companies when she first approached them, that interest waned the further through the process she got. When I asked why she thought that was, she described a pattern.

“It was an interesting phenomenon when I was fundraising. I would speak to an associate or a principal who was a woman, and they were really interested in Bloom and thought, ‘There’s something here.’ Then they passed me onto the next person, the partner, who was without fail, in my case, a straight, white male.” Mohanty says, “I would do the whole pitch…and in the end they would just go ‘I dunno’ — I tapped out when I got to the white man.”

For context, Mohanty is a woman of color, and many of Bloom Money’s customers are immigrants to the UK.

She goes on to explain that each of those initial contacts she made at the various VC firms got back in touch with her after it became clear their funds weren’t going to invest in Bloom Money and asked if they could invest independently. They understood the problem and Nina’s solution, and they thought the business was a good investment to the extent they were willing to stake their own money on it.

“If that’s not evidence that we need more diversity in partners then I don’t know what is,” Mohanty said.

Mohanty’s career pre-Bloom should have set her up for an easy path to investment, and yet it was only when she went to funds where there were “women with cheque writing power” that she got the desired result.

Not Just Fintech

To make sure this wasn’t a fintech-specific issue, I spoke to women founders in other industries. Emilia Theye, co-founder of tech-based mental health proposition clare&me and psychologist by training, corroborated Nina’s experience when it came to facing hurdles fundraising, despite having industry experience.

Theye described being asked repeatedly by investors, “Who built this for you?” and “Where’s your (male) CTO?” These aren’t questions that would be asked of a male founder. This issue of investors asking women founders different questions to their men peers is well known, but has yet to be solved, despite numerous funds introducing gender equality training.

Theye’s solution aligns with Mohanty’s — more senior women in funds who are more likely to spot when lines of questioning are “woman-founder centric” and challenge it. She suggests that unconscious bias means even simply challenging questions such as, “is the target market big enough?” with “would it be big enough if this was a male founder?”

The point is that women are held to different standards than men, and that it’s typically unconscious on the part of the questioner, so gender equality training doesn’t solve it. Instead, those practicing those differing standards need to be challenged by those who spot them.

It Gets Worse

There is also the still significant problem of conscious bias. One founder I spoke to shared some of her highly negative experiences with me, related to investors who were men. Notably, she was propositioned by a number of them following initial meetings with “love letters,” and received late night messages asking if she was available to socialize.

Such communications from professional acquaintances would make most women feel uncomfortable, but with a power dynamic of investor and founder there is likely to be further concern on the founder’s part that getting funding would be reliant on their reacting positively to any advances.

This sort of behavior is clearly unacceptable, and yet the fact that it’s being displayed by more than one investor suggests it’s more ingrained than just one bad actor. When those bad actors are Angels, there is no employer to report them to, even if the victim is willing and able to do so.

Where Do We Go From Here?

One of the major hurdles to being a successful woman founder is clearly accessing funding. So how do we address this issue?

Both Mohanty and Theye mentioned the positive impact that communities of founders willing to help each other in areas such as introductions to investors and pitch creation can have. But, more crucially, they emphasized the need for more women investors with cheque writing power.

In order for that to happen, there needs to be an acknowledgement that biases do exist and that one way of negating their impact is to have greater diversity among the people making the final decisions on who gets funding. Practical steps to getting to this point include investors of all genders being willing to admit they don’t know or understand something — whether that’s pitch specific or related to a female-founder’s journey to that point — and less diverse investors being willing to stand up and be allies.