- Only a tiny percentage of VC funding goes to female-led businesses - despite many investors expressing an appetite to invest in diverse teams.
- Women are also building fintechs that marry profits and purpose, and building a more sustainable financial ecosystem.
- If the public and private sectors, as well as financial institutions, work together, they can drive systematic change.
The opportunities in backing diverse founding teams
At Silicon Valley Bank, we pride ourselves on living our values and doing everything in our power to promote diversity, equity and inclusion within the innovation ecosystem.
To emphasise the impact that embracing different perspectives can have, we recently sat down with Triin Linamagi, the Founding Partner of Sie Ventures, to discuss the opportunities that come with backing diverse founding teams.
Hi Triin – thank you for taking the time to connect. Could you introduce yourself and tell us a bit about what Sie Ventures does?
I’m Founding Partner of Sie Ventures - a capital platform for female (co-) founded businesses and investors in Europe.
Our goal is to drive more capital to female (co-) founded businesses by empowering founders with better access to investor networks, and setting them up for success through our Catalyst programs. We also work closely with VCs and Angel Investors.
Prior to founding Sie, I was a founder and investor: I was involved in building three businesses and I have been investing in pre-seed and seed for the past six years through funds and accelerators.
Sie Ventures is known for backing founders who challenge the status quo. What exactly does that mean to you?
We back founders who are building truly innovative businesses that are changing the way we work, manage health, build wealth and live in a cleaner, safer world. We back the founders who can spot opportunities and gaps in areas that have previously been overlooked, who are ready to make a difference.
There are abundant opportunities in backing diverse founder teams. What is the landscape like in this space?
Despite abundant opportunities, in 2020, just 1.7% of VC funding went to female-led businesses 1.
One of the biggest challenges for founders is fundraising. Many still report obvious instances of gender bias in investor pitches. This despite the vast majority of investors claiming they want to invest in female-led businesses.
Diverse founding teams deliver 2.5x higher returns2 to their investors than non-diverse teams. We’ve also seen that female-led businesses tend to focus more on long-term sustainable growth as opposed to short-term growth strategies.
That means certain fund structures or a lack of decision-making power are preventing some investors from accessing significant value.
According to your estimate, how much money is being left on the table – what is the value that these founders can bring?
By backing female entrepreneurs, we could increase global GDP by up to $1.6- $2.3 trillion3 – approximately 2-3% of global GDP – and generate $288-$433 million jobs globally.
And if banks and other financial service providers catered for women at the same rate as they do to men, they could generate an additional $700bn global in annual revenue4.
Are there specific sectors where you’re seeing female founders drive innovation?
Women tend to build startups that focus on solving real-world, societal issues like sustainability, the future of work, access to healthcare and finance.
I believe that’s a reflection of their growing frustration with being ignored.
Despite the fact that women will inherit 70% of the wealth by 20305 that will be passed down to the next generation, they have been excluded from finance-related conversations. Thankfully, I think we are now at an inflection point to fill this gap.
Women are also building fintechs that marry profits and purpose, and building a more sustainable financial ecosystem. Some 73% of women6 are unsatisfied with their current financial services, likely because the fintech world is very male dominated.
And the situation is worse in emerging markets, where some 70% of women owned SMEs in emerging markets are underserved7. 10% of countries don’t even provide women equal ownership rights to property. That is another hugely underserved market and we believe women are best placed to innovate in fintech to challenge the status quo.
Another area where female founders are best poised to identify and solve problems is in the consumer space. Women make approximately 85% of consumer purchases8, and can see better solutions in areas like waste management, the circular economy, and food or climate tech.
Plus, because women play a central role in agriculture and the food value chain, their knowledge and leadership are driving sustainable resource management and practices.
We also believe women are best placed to define the future of work, improving diversity and creating more flexible but highly-connected workforces made up of different generations.
There’s also a huge gender data gap in healthcare. Historically over 90% of health research was done on the male body and the vast majority of health, medical and pharmaceutical products are built for the male body. Even though women make up half of the world’s population, healthcare solutions are still widely known for overlooking critical female health conditions.
But it’s not just women’s health. Given their role as primary caregivers, women can offer real insight into the wellness of everyone from children to the elderly, and build more inclusive, affordable, personalised offerings.
Clearly female founders can have an impact beyond financial gain
Absolutely. Because women tend to build startups that focus on real-world societal issues, capital placed in their hands has a broader societal impact.
Marrying profits and purpose also means that female entrepreneurs can drive huge change within their communities. Women tend to invest more of their income in the health, education and welfare of their families and communities than men do, which has a ripple effect.
However, arguably the most valuable contribution women make is that they can bring untapped talents, perspectives and innovation to solve the world’s most pressing problems.
What’s the secret to the success of diverse founding teams?
To me, it’s simple. Female-led businesses tend to focus more on long-term sustainable growth as opposed to short term growth strategies. Diversity comes with multiple perspectives. When founders bring a variety in the backgrounds and experiences and thinking, they are more likely to bring better results.
How best can the broader innovation economy empower female founded businesses?
We need the support of the public and private sectors, as well as financial institutions, to drive systematic change.
The public sector should look to improve policies and invest in educating and upskilling young women, while also empowering female entrepreneurs to start businesses. In the private sector, we need to drive more funding to female founded businesses and implement gender equality policies. And for financial institutions, it’s important to apply a gender lens to investment instruments and support female talent.
Within the VC and innovation ecosystems, we need to showcase successful female founders, and make them role models. But that’s not enough. It’s equally important to educate and provide opportunities for women to start investing as angels, appoint more women in leadership roles in Venture Capital, and back more female-led VC funds.
There’s also a lot of work to be done around the biases in the investment process in Venture Capital, measuring and setting KPIs for D&I, and diversifying the deal flow sources.
What does success in the ongoing battle for equality and equity look like?
I hope at some point we don’t have to talk about the lack of funding going to female founders or black founders because we already have 50% of funding going to diverse founding teams instead of 1.7% but we have a long way to go.
Do you have any advice for female founders battling to get the support and respect that they deserve?
As one of our founders quoted “It is important to not focus too much and not get bogged down on being a female founder. If you focus on your mission, your customers, who you are and why you are doing it, investments will be sure to come at some point”.
I truly agree with her.
Make sure you are building a product your customers want, believe in yourself, the businesses you are building, and the opportunity you are offering to your investors to be part of your success.
Confidence, persistence and resilience go a long way in helping you to build a strong network of people around you.
1 Atomico, State of European Tech 2020, 2022
2 Kaufmann Fellows, Deconstructing the Pipeline Myth and the Case for More Diverse Teams, 2019
3 Bloomberg, Citi GPS Report: Closing the Gender Gap in Entrepreneurship, to Add $1.6-2.3 Trillion to Global GDP (c.2-3%) – Catalysing, March 2022
4 SME Finance Forum, MSME Finance Gap, 2017
5 UMB, Four considerations for women going through a wealth transfer, 2022
6 Financial Alliance for Women, Poised for Growth, 2022
7 The World Bank, SMEs Financing: Women Entrepreneurs in Ethiopia, 2015
8 Inc., Women Drive Majority of Consumer Purchasing and it’s Time to Meet Their Needs, 2019
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