One of the many competitive advantages that UK fintech companies have, compared to their American cousins, is gender diversity. According to a recent study by Wayra and Fanshaw, a London-based tech entrepreneur is over three times more likely to be female than in Silicon Valley. However, in the UK ecosystem, men are almost twice as likely to get VC finance as women - and 59 per cent more likely to secure angel investment.
Why the imbalance? Life on the fundraising trail is tough for any entrepreneur, but for a female one there are extra pitfalls. Humans are wired to unconsciously prefer people like themselves. As long as there is a paucity of VC investment firms with two or more senior women at the helm, female entrepreneurs have a natural disadvantage. I say two or more because, having been the sole woman on many leadership teams, I can say from experience that the real value of gender diversity comes when there is a critical mass of each gender. When there is more than one woman at the table, we all speak up and the cognitive diversity between women becomes evident. We stop being "the woman at the table" and become "a person at the table".
We are also all subject to the unconscious bias that comes with our upbringing around gender roles. Funded female entrepreneurs are more plentiful in the retail tech space and in fintech, there's a clear skew of the female CEO population to the social enterprise and/or crowdfunding spaces. Is that because VCs prefer stories where "it makes sense" that a woman is at the helm? Or is it because women self-select into those sub-segments? Either way, it makes the data set (explicit or implicit) that investors are using to judge whether a start-up is likely to succeed biased.
The other night, a friend was talking to me about an algorithm that can predict tech start-up success. I struggled not to roll my eyes for many reasons, not least of which was the obvious exclusion of any significant number of women from the data set upon which that algorithm was based. In fact, he and I both know well another female software entrepreneur who was told by a VC last year, "You don't fit the pattern of a successful tech entrepreneur because there haven't been many successful female tech entrepreneurs". The "computer says no" attitude is a scary one, especially when the computer is based on a biased data set.
For a female tech entrepreneur, that is all very depressing. But when you've been at it for as long as I have, you learn not to dwell. Instead, focus your energies on people who are truly open to the prospect of a successful female-run tech start-up. Interestingly enough, one way I have learned to sharpen my skills has been through my membership of Young Presidents' Organisation, the largest global network of CEOs, where I regularly meet with a small group of peers, men and women business leaders, who function as a personal board of directors, and time and time again have picked me up when I've felt defeated, and told me when they think I'm being treated differently by male investors or customers because I am a woman.
They may not be able to change the stats, but they have done wonders for my self-awareness.
The good news is that the gender bias displayed by the vast majority of VCs means there's a competitive advantage to be had. Those that recognise the value of diversity within their own senior teams and do something about it can identify gems that most people are passing over, and benefit from the bias that female entrepreneurs will innately have toward working with them.
A big part of what fuels technological innovation success stories is capital, and while the situation is improving, early stage capital is still less plentiful in the UK than it is in the US across the board. If UK angel and VC organisations can build more women into their investment decision-making teams, I suspect they will not only benefit from the diversity those women bring to the discussion, but also enjoy a better deal flow of female-led businesses and maybe, just maybe, will start funding them more frequently.