2 February 2018 Issue 21 Feb/Mar

The trials and tribulations of raising money as a female founder

Why do companies led by women receive far less investment than those led by men – and how can that change?

Pip Jamieson (pictured above) has become one of the best-known female founders within London’s tech scene. In December 2017, she announced her latest £4m funding round for her creative network The Dots.

Yet in the months leading up to it, she made sure a male member of her senior leadership team was alongside her at every investment meeting.

‘I learnt the hard way,’ says Jamieson. ‘I still do the pitch, but I [don’t] get the respect. In some meetings, investors only speak to my male counterpart.’

Jamieson’s experience is echoed many times over by other female founders. Take Sarah Wood, another prominent female founder based in London. Her adtech agency, Unruly, was acquired by News Corp for £114m in 2015.

And yet, she told Courier, she found herself frequently mistaken for a PR in investment meetings.

Reverse mentoring

Last year, Jamieson began ‘reverse mentoring’ a number of VCs. ‘They’re really willing to change the way they’re assessing founders,’ she says. Typically, she argues, VCs ‘unconsciously look for masculine traits – people who are dogmatically wedded to their vision’.

‘The way they test for that is to throw a left-of-centre question at a founder – like an idea for a product that’s different from what they’ve presented. They want a founder to say, that’s ridiculous, and dismiss the idea out of hand. It’s a bit Trump-esque. But that’s not how [people with feminine traits] tend to act; they take ideas onboard, listen, assess, are more collaborative – and then they’ll be decisive.’

Ambitions of equality 

There are difficulties not only with the way investors actively judge founders, but also with subliminal assumptions that may be made. Robyn Scott is co-founder of Apolitical, a platform which connects civil servants across the world. ‘In some ways the biggest problem is an unconscious bias assuming women’s ambitions are lesser than men’s,’ she says. ‘It doesn’t manifest itself in outrageous and shocking stories, but more of an insidious white noise against the conversations you have with, particularly, male VCs.’

‘It’s a fact that there are fewer women who’ve founded and exited huge and disruptive businesses,’ she adds. ‘VCs are well-known for pattern recognition. Whether pattern recognition in terms of person, or model – “Uber for x”. They don’t have a good pattern yet of women starting wildly successful disruptive businesses, in large numbers.’

Women backing women

Jamieson believes getting more women into VC firms and investing will have positive knock-on effects.

Yet this will clearly take some time. The problem partly stems from the fact that many investors are themselves successful founders – and so, on the most part, men. Increasingly, however, funds such as Local Globe are taking on younger women and training them to become senior partners to address this imbalance.

‘VCs have a responsibility to be building a firm that’s more representative,’ says Nicola McClafferty, investment director at Draper Esprit. ‘The best decision-making comes from a place of diversity.’

Sarah Turner is co-founder of Angel Academe, a group of angel investors which only invests in companies with at least one woman on the founding team.

She thinks that with the numbers as they are – with most investment decisions being made by men – even the women who do work in venture capital start following the examples of their male colleagues.

‘They’re so heavily outnumbered,’ she explains. ‘Behaviour starts to change when 30-40% of investors are women. Now they’re not going to be able to stick their neck out.’

To counter the imbalance, Angel Academe aims to encourage more women to become angel investors (although it counts men amongst its members).

‘It feels as though gender bias cuts both ways,’ says Turner, pointing out that if men tend to fund men, women also tend to fund women. ‘There’s a strong appetite for backing other women in our network.’

The benefits of bringing more women into investment also goes beyond female founders. ‘It makes more money available for all early-stage businesses,’ she points out.

Play the game

Until the status quo changes, female founders must decide which rules they want to play by.

‘I wish unconscious bias didn’t exist, but I think founders do need to put in place coping mechanisms to deal with it,’ says Jamieson, who says she is ‘a more assertive version of [her]self’ when meeting investors.

Scott agrees that ambitious female founders ‘need to learn how to head those biases off before they sabotage what you’re trying to do’.

‘You have to assume that if you’re talking to a man, there is a strong chance he is going to be underestimating your ambitions on the business side of things, and you have to head that off. We often start conversations with really ballsy numbers and use that to set the stage. People are sometimes taken aback with it. It deals with any latent assumption.’

Confidence controversy 

Many people within the business world say women lack the confidence and ambition of men.

‘I’m reluctant to call it confidence, but women are naturally more reserved,’ says McClafferty. ‘VCs want people to sell you on a big vision. Women have a tendency to undersell ambition.’

Kate Daly, co-founder of divorce app Amicable, also disagrees with the lazy generalisation. ‘I’m so bored of hearing that women are under-confident,’ she says. ‘I go to a lot of events where it’s trotted out that women need mentors, are not bullish enough. But we’re not under-confident, we don’t always need mentoring. We need people who have money to spend their money on women.’

Daly thinks the problem lies within VC culture, and not with female founders. ‘They want you to grab their attention with a flashy presentation that doesn’t shape up to reality at all. They would rather give money to two men bullshitting than two women who’ve proven traction.’

Change the game 

Yet courting VC money is far from the only way to grow a business, despite the acclaim successive rounds of funding receive in the media.

‘I think the ecosystem is male-dominated and masculine. High-growth, very testosterone-driven startups end up being glamourised and portrayed as heroes,’ says Lu Li, founder of Blooming Founders.

‘The challenge is whether we should play the game,’ adds Li. ‘Or whether there’s some kind of alternative we can create for ourselves – one where we can grow the business, maybe not as fast but more sustainably, and still achieve a good result. And what is a good result? Everybody has to identify their own measure of success to start with, and that’s not only about becoming a unicorn.’

‘I hope there’s going to be more awareness around alternative ways of funding; venture capital is just one option. I think angel investors can be quite crucial. I also think all exited founders should invest back into the ecosystem and become angel investors, because that’s the best way we can support early stage startups and create a truly entrepreneurial society.’