Know a woman with a great business idea trying to catch the eye of the investment world? Tell them to buckle up, because research suggests they are going to have a problem, writes Laura Miller
Of all the UK private equity investment in 2018, female founded companies won just 2%, according to last year's British Business Bank's Equity Tracker.
Two US studies shed light on what is going on: business school Babson College found 90% of venture capitalists were men. BBC's Dragons Den may try to keep a 50/50 split when it comes to male and female angel investors, but the real world is very different.
Arguably a problem in itself, the real kicker is analysis by the California Institute of Technology, which found female-fronted companies were seen as less desirable to male investors. Male-led start-ups were almost twice as likely to get funding from male investors than female-fronted ones as a result.
CEO of the UK Business Angel Association Jenny Tooth says: "Despite media coverage of women in business and tech, it still highlights the gargantuan challenge for female-founded businesses to access sufficient investment to scale up."
Lack of investment in women entrepreneurs does not just cost them - all investors lose out. Female run businesses perform as well as or better than those led by men, according to the Babson study. With the right investment to scale-up they could be filling retail investors' pension funds and growing their retirement pots.
Tooth continues: "The opportunity is clear: create an environment where women start and scale businesses at the same rate as men and we could add nearly £250bn to the UK economy."
Holly Mackay helped set up Allfunds Bank and founded Platforum, the fund platform research firm. Now heading up financial education site Boring Money, which she also founded, Mackay recently pitched to a group of angel investors called Angel Academe, most of whom were women.
"Until that meeting I had only pitched to men," she recalls. "I really loved it - so refreshing. We need more female investors to change the experience. We all feel more empathy with ‘people like us', so why can't all-male private equity and VC teams appoint female business advisers for relevant sectors to add a different view?"
Mackay's experience of male investors was they were looking for exaggeration, something she did not want to provide.
"They are not really interested in businesses that have an ounce of humility," she muses. "They want to be sold the next Uber, and that dogged belief as a start-up with limited revenues takes massive confidence, and arrogance.
"I was brought up not to show off, and hate making promises I'm not 100% sure I can keep, so my business plans have already had a very strong internal ‘rubbish detector' applied to them. Some of these factors make me fundamentally ill-equipped to raise a penny from VCs."
Tooth says Mackay's experience echoes that of many female entrepreneurs seeking investment: "It's an old trope: men are cavalier with money, women are cautious, but when it comes to the pitching room I do find female entrepreneurs undersell themselves; asking for just enough, or even less investment than they need. With men, I'm met with outrageous requests.
"Neither inspires confidence in investors. The trouble women face is that they are walking into rooms filled predominantly with men, for whom a cautious approach may be a red flag."
Shaking up the investment world to bring more diversity to those who hold the investment purse strings to benefit female led business is likely a slow process.
In the meantime, Tooth recommends women entrepreneurs seeking investment do three things:
1) Have a growth plan
"Women lack entitlement," she argues. "They want to feel they have proved the worth of their business before asking for huge sums - something that tends to trouble men less."
Walk in with a forensically thought out plan of how you want to scale your business and you will prove your ambition through the clarity of your planning.
2) Work out how to execute it
Do not be afraid to show what you could achieve if you had the money. Think about what you need and ask for it. Don't feel by not asking investors might respect you more - they will just see it as a lack of ambition.
3) Investors aren't the enemy
Women can undersell themselves due to a misconception the amount of money they're asking for will correlate to the number of shares, and control, they will have to give up. But investors want to align with entrepreneurs and support them. Ask for help, and show you are willing to collaborate at an early stage.
Women in Investment Festival
The Women in Investment Festival, in partnership with sister publications Professional Pensions, Professional Adviser, Retirement Planner and Investment Week, is a one-day festival that seeks to serve as a beacon for the benefits of a truly diverse industry for all, whatever gender, colour or creed. Although it will naturally talk to and celebrate the achievements of women, we also believe we should showcase the role men play in the equation, and highlight examples of best practice where their support is helping to drive change for true gender equality.
It takes place on Tuesday 3 March 2020 at the Brewery in London, UK and we are currently running a discounted super early bird ticket price. Head over to the website here for full details.