I was recently at a networking event chatting to a man in his thirties I recognised from university. Like me, he invests in start-ups, so we got on well, peppering the conversation with obligatory industry jargon.
“Are you investing based on product-market fit or just MVP (minimum viable product)?” he asked. I explained that we considered all stages, told him about the sectors we liked, and then I detonated what I knew would be the bomb: “We only invest in women, or men from minority backgrounds.”
“So you are a philanthropist?” he offered. “Good for you!”
He had hit on one of the three standard responses from men I get when I mention that I prioritise female entrepreneurs.
First: “So you are a charity?” This view suggests that women need help from altruistic donors to get their businesses going.
Second: “Ah! You are a social impact fund!” This response insinuates that women cannot possibly make you rich, so there needs to be a social mission attached to give an investor something virtuous to talk about at dinner parties.
Third: “Great, but why would you limit yourself?” This may seem like a fair comment, but if you asked me about my deal flow I would tell you that I reviewed more than 100 opportunities in six months and was blown away by the quality of applications.
Then there is the feedback I get most from women: “Fantastic!” Go figure.
I am neither a charity, nor am I particularly driven by a social mission. Like any investor, my business partner, Waheed Alli , and I want to make money. We invest in women and minority men because such opportunities are largely overlooked — and therefore attractive.
The entrepreneurs I meet often thank me for a “refreshing” conversation, which makes me wonder what kind of questions they get asked by other investors. Tania Boler, co-founder of Elvie, which makes pelvic floor trainers, was told her product was too niche to be backed. That is despite the findings she presented showing that one in three women experience pelvic floor problems and one in 10 will require surgery.
Raising money as a woman is hard. I hear stories about investors stringing female founders along for months, dangling offers of funding, and then asking them out on a date instead. Male entrepreneurs are 86 per cent more likely to be venture capital funded and 56 per cent more likely to secure angel investment, according to a 2017 study from the Entrepreneurs Network. As a result, only 9 per cent of global VC funding in the first quarter of this year went to companies with at least one female founder, according to TechCrunch.
This lack of investment is closely correlated with the number of women in decision-making roles in VC. Before we backed Tessa Cook, co-founder of neighbour-to-neighbour surplus food-sharing app Olio, she met with dozens of potential investors. “My conversion rate of female investors was over 75 per cent, whereas male venture capitalists converted at less than 10 per cent,” she said.
Women-run businesses may well be overlooked because of subconscious bias. Investment is all about risk assessment and a male investor will understandably find it easier to relate to a man who went to the same school as him, or has similar interests. A woman pitching a tampon subscription business to a team of men will not enjoy much rapport. Early-stage investing in particular relies less on hard data and more on gut feel.
But there is plenty of evidence to suggest that a mainstream VC investor is missing the trick. First Round Capital published a report finding that the female-founded companies in its portfolio outperformed male-founded companies by 63 per cent, as measured by return to investors over 10 years.
If venture capitalists want a slice of that pie, they need to hire women investors and give them the power to make investment decisions. After all, why limit yourselves?