The fintech revolution, by which entrepreneurs using breakthrough technology seek to transform traditional financial services as provided today by incumbent banks using end-of-life IT platforms, is itself a living example of the process of mobilizing finance.
Fintech start-ups are often bootstrapped by founders’ private savings, later funded by angel investors if the underlying business concept is proved, then built through rounds of venture-capital investment as the business scales up and ultimately IPOs as a profit-making established, sustainable business.
A lot of founders’ time is devoted to raising money, when it could be better spent on developing the core technology, building the business, winning over staff and customers. And, while many fintech entrepreneurs talk about democratizing finance, opening it up to the unbanked and promoting inclusion, that fund-raising process is not an easy or familiar one.
The case can be made that half the population of potential entrepreneurs start off with an immediate disadvantage.
“The statistics suggest that perhaps as few as 20% of business angels are women and only 6% of the partners of venture-capital firms are women and that less than 5% of venture-capital money invested goes to women-led companies,” says Anne Ravanona a business consultant who is founder and CEO of Global Invest Her, a platform designed to help women entrepreneurs become investor-ready to raise finance.
"There are no statistics on the women-led companies that try and fail to raise money, but the number of women entrepreneurs stands at around 10 million in the US and 11 million in Europe.”
Ravanona adds: “It is harder for women to raise finance. And our aim has been to explain and de-mystify the funding journey, partly by interviewing women entrepreneurs who have successfully raised money, partly by asking venture capitalists and angel investors how they like to be approached, what they look for before investing, and ultimately by setting up a system for successful entrepreneurs and business leaders to mentor women seeking to raise funding.”
The portal operates a subscription revenue model and Global Invest Her runs events as well as webinars and a private-funding forum to connect women entrepreneurs and potential backers.
Ravanona isn't shy about generalizing over differences between how men and women think. “Women tend to be more relational than men. They tend to build lots of relationships on their funding journey, meeting lots of people for 500 cups of coffee, many of whom turn out not to be helpful at all. Perhaps because of that and the way they network, the whole process often takes longer than women entrepreneurs expect and they are more likely to get discouraged.
“Men have different networks and ask for the information and contacts they need quicker. In addition, women have a tendency to ask for less money than they should during early rounds of investment.”
Understanding the rules
Ravanona thinks that the answer is not so much changing the rules of the fund-raising game as helping entrepreneurs understand them in the first place.
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“Women, just like their male counterparts, are likely to face the same 10-minute pitch to venture capitalist panels, most of whom are likely to be men. The 10-minute pitch works better for men than for women, so they need to be prepared to be judged and to deal with that different way of thinking, knowing that the men judging their business may problem-solve and make decisions in different ways and have their own blind-spots.”
How does this work? Ravanona says: “If I ask you a question, as a man you’ll probably give me a straight answer from A to B. Women tend to think more broadly and add more details from A to D, and sometimes men can read that as being off point.”
True to her business-consultant roots, Ravanona and John Fayad are launching a training series (beginning with a webinar) with practical do’s and don’ts to help women “own the moment” when pitching to male investors.
But there is a danger here, too, for those predominantly male panels of venture capitalists, as much as for women entrepreneurs seeking finance. “Men’s minds, if they can’t grasp the fundamental drivers of a market, for example one based on products targeted at women perhaps in fashion, tend to drift off. They can miss opportunities, and some women entrepreneurs pitching to them say they can actually see the curtains closing in the male investors eyes,” says Ravanona.
And that’s a problem of missed opportunity. Ravanona points to a recent Kauffmann Foundation study in the US of women-led technology firms that showed that, once successfully funded, such firms provided their backers with returns up to 35% higher than male-led firms.
“That’s why some male venture capitalists are getting increasingly vocal about wanting to back more women, because they make more money. And we need those voices to be heard and amplified.”
There is a growing belief that women business leaders have a more nuanced sense of risk than their male counterparts and that they are more likely to be serial entrepreneurs if they can get their first venture funded.
Ravanona herself wants to build a successful business, but she emphasizes: “We are not a broker. Our aim is to be a global community for women entrepreneurs, only focused on helping them learn about funding in a safe place and become investor-ready. We do not directly write them a cheque. We help them understand the funding game and how to play it, so they can raise the money they need, then get back to building their business. The mentoring side is important and we have great plans to increase deal flow of women entrepreneurs to investors. Right now we want to get the education side up and running. What’s most important is that more women-led companies get funded.”
Much effort in recent decades has gone into studies in development economics into the positive impact of educating and financing women. For now, Global Invest Her is focused on the developed markets of the US and Europe, where the ground is generally more fertile for entrepreneurs to emerge. They may ask for less money than their male counterparts but women entrepreneurs are hardly rarities.Ravanona says: “Today, approximately 30% of all new businesses worldwide are set up by women. Imagine if we could get that to 40% how big an impact that could have on global growth.”