Removing mirroring in VC: how to level the funding field for female founders

A recent survey of female founders, by Pink Salt Ventures, threw up some pretty startling results. Buckle up, as usual, a piece on investment in female-founded companies might become 'uncomfortable' reading, for some. 

The main sticklers that catch in the back of your throat are; 97% of those surveyed agree there is a fundamental difference in how investors treat male and female founders, 83% said that the lack of female decision-makers is the largest barrier to funding, and 76% believe there is a lack of awareness of what a VC-backable business is. The survey of 90 female founders was done in partnership with Dr. Dana Kanze – who brings expertise to gender bias in venture capital. 

While many will find these results not one bit surprising, others will wonder if we are indeed living in 2023. For a deeper delve into the reasons for the survey and the work Pink Salt Ventures do, Tech.eu grabbed a word with Samira Ann Qassim who founded the firm with Saloni Bhojwani. (Main image: Bhoiwani and Qassim)

Pink Salt Ventures

Pink Salt Ventures is a UK venture capital firm solely focused on funding female founders. Based in London, you might be surprised to find out, it wasn’t born out of frustration at the lack of VC funding for female founders, it was born from the opportunity that backing female founders and the industries their start-ups represent bring to the table. 

“I came at it as an outsider, not aware of the funding statistics, just seeing a lot of amazing entrepreneurial activity, and then I got deeper into the space and saw all of the statistics - obviously, there's a massive 'on paper' opportunity,” says Qassim, who had herself previously founded a start-up but left before reaching the funding stages. 

Lacking exited serial female entrepreneurs

When asked what might be the main issue with funding and female founders Qassim felt that there was not just one main issue. 

"I think there aren't enough exited serial female entrepreneurs who can funnel money back into the ecosystem. There also aren't enough female partners and women with the power to write cheques and make decisions at the big firms,” she says. “There needs to be more investors who are supporting them at the earliest stages so they can get into the pipeline”.

“I think, just given how the industry is structured, venture capital typically works in networks and if the networks are predominantly male-dominated, then it works against women,” she explains. 

This doesn't bode well if the 'exodus of women in European VC', that Sifted reported on lately, turns out to be a trend. 

A risk or an opportunity?

Qassim goes on to explain that if venture capital is as she says ‘typically a pattern matching game’ then for sure women will face bias at the earliest stages of fundraising ‘when it's just them and a pitch deck’. 

“When you have someone that looks and sounds different, they can be unconsciously viewed as ‘a risk’,” she says. “And then how that plays out is typically they get asked a lot of 'risk-related questions' instead of 'opportunity-related questions'.”

This is where Kanze comes into the fold, her work covers how this unconscious bias may play out and how to combat it in a meeting. Speaking about the results of the survey Kanze said, “These rich insights show the urgent need for investor-side, rather than founder-side, reform - until female founders receive the funds they need at the valuations they deserve, they won’t participate in the liquidity events that can enable them to become serial entrepreneurs and investors themselves.”

Kanze's TEDtalk on why female founders get less funding and her study of behaviour in investor meetings is well worth a listen. 

Aside from this realisation, there is also the findings of a Harvard Business Review paper that found, when it looked at over 2,000 venture-backed firms in the United States, 'that women-led firms whose first round of VC funding was raised exclusively from female VC partners were two times less likely than those whose first round included male partners to eventually raise a second round'.

This HBR report was flagged to this author by Marieke Gehres, an investor at Earlybird VC, during a very interesting panel discussion on levelling the playing field in European VC at Tech.eu Summit. A worrying situation if all the groundwork is done to ensure more early-stage ventures get a chance but there's no follow-through from additional VC how are female founders expected to survive? Do VCs think that the early round funding in female founders is was a 'token gesture'?!

What's a VC-backable business?

Back to the Pink Salt Ventures survey and the concern that '76% believe there is a lack of awareness of what a VC-backable business is'. What exactly is a 'VC-backable businesses'? There is no shame in admitting if you don't know, no matter what gender you are. 

One person who also picked up on this stat from the Pink Salt Ventures report was Claire Bristow a Senior Investment Associate at Skalata who wrote an informative Medium blog to get those of us who didn't know what one was, up to speed. Well worth a read, but here is a little excerpt from the piece which quantifies a VC-backable business.

'I think the very first thing you need to know about venture capital is that investors are assuming, and expect, that many of the companies they invest in will fail (e.g., never get off the ground, insolvency etc.). This is because they operate under the assumptions of power law, which essentially means that they are counting on a few big (read; enormous) wins to well and truly make up for the rest (and some).

In other words, a small number of investments provide the majority of the returns. The return an investor is looking for will depend on the fund size — for example, a firm with a $1B fund will be looking to return $1B to the folks who gave them the money in the first place (LPs), plus some (hopefully at least at 2–3x the invested amount, known as the return multiple). Therefore, they are looking for companies who have the potential to be valued in the billions of dollars'.

And one thing that founders should certainly know is, not every start-up is a VC-backable business, and nor should it be, a rejection from a VC is not the end of the world, you might have a great little business that will be successful in its own right, not everyone should be chasing unicorns.