What we’ve learned from asking 100+ female founders about their fundraising experience
We all know the numbers. Only 15% of founders in Germany are female and in 2019 both women-only teams and mixed teams have lost (!) shares of VC money (from 2.6% in 2016 to 0.4 % in 2019 for women-only, and from 8.4 % to 8 % for mixed teams) in Europe. At the same time, diverse teams perform better and VC firms with only 10% more female investing partner hires have 1.5% higher fund returns and see 9.7% more profitable exits.
With this information in mind, we were keen to partner this summer with Grace — Accelerate Female Entrepreneurship to understand what is behind those numbers and to start making concrete changes in VC. Grace is supporting female entrepreneurship by offering formats for women to start their own business.
We initiated a pulse check survey addressing female founders with the goal of finding out how they experienced their fundraising process with investors in the DACH region. The survey aimed at gaining a better understanding of the current processes and practices shedding light on challenges and potential improvements.
For the survey, we had support from various individual investors and ecosystem partners from Acton Capital, Ananda Impact Ventures, APX, Bundesverband Deutsche Startups, Capnamic, Earlybird, Factory Berlin, Female Founders, German Tech, Google for Startups, JOIN Capital, primeCrowd, Ringier Digital Ventures, seed+speed, WLounge. A big thank you!
In the past months, we’ve spent time reflecting on the results with fellow investors and ecosystem partners to discuss and implement first measures. Even though there are various reasons for the status quo that are out of our control, we wanted to start with things within our control and move the needle step by step.
About the survey
110 female founders took part in the pulse check. 84% were leading the fundraising process. 50% of them are in the seed stage. 30% of the participants received funding from Venture Capital investors. The majority of companies are active in the (Enterprise) Software, Fintech and Health & Pharma sector. You can find the full report here.
Access
1) Personal Network still beats everything
90% of the founders who received VC funding met their investors through their network. Personal connections play a vital role to meet potential investors and get feedback on business ideas. Yet female founders often have a harder time accessing founder & investor networks. This minimizes the chances to receive funding from potential investors and also doesn’t allow female founders to learn about the fundraising process and gain valuable feedback.
Possible mitigation measures for investors
🕐 Open Office Hours: Investors can attend or run Open Office Hours with an application system to filter for relevant companies while at the same time removing the barrier of a “warm intro”.
☕️ Inclusive networking: Different and more inclusive networking opportunities can make it easier for female founders to build up a network (e.g. organizing breakfasts instead of evening events).
🌱 Scouting Programs: Diversifying deal-flow by working with angel investors, scouts, and organizations who can tap into other/different networks, investors usually don't have access to.
🐽 Goals for sourcing: Investors need to track and challenge how they source investment opportunities. They can set out goals and aim for X% of all companies coming into their pipeline to have a founder from an underrepresented background.
Possible mitigation measures for founders
🕐 Open Office Hours: Founders should look out for office hours offered either by individual venture funds on their website, accelerator programs, or ecosystem-wide initiatives. They should come prepared with a set of questions, treat the session not as a pitching session but rather as an opportunity to get advice and feedback, and do their research on the investor beforehand.
✉️ Cold emails: If well written, cold emails to VCs can still get founders the wanted attention. Lots of VCs share their individual addresses and can be approached via Linkedin / Twitter. An exemplary cold email template by Northzone can be found here.
Investment Process
2) Communication is key
The overall fundraising process with VCs was rated at 2.1 out of 5, while 5 being the best. The data shows that the biggest issues during the fundraising process are the lack of clarity, feedback, transparency and communication in terms of expectation management and decision-making. While fundraising is definitely challenging for a lot of founders, there are still discrepancies in how challenging the process is for female founders. Difficulties go back to the lack of connections to experienced founders, investors and advisors.
Possible mitigation measures for investors
🔎 Transparent communication: Investors should carry out the investment process as transparently as possible and set out clear expectation management towards founders. This can be already improved by giving out a clear overview of the timeline, decision-making process and evaluation criteria.
Possible mitigation measures for founders
❓ Ask for clear feedback: Founders on the other side should ask about the investment process steps, what traction is expected prior to raising a financing round and feedback if investors say it’s not a fit.
3) Gender bias is a thing
45% of the survey’s participants rated the fundraising process as (unconsciously) gender-biased. This resulted specifically in stereotype thinking (e.g. bias about financial acumen, technical ability, children) and certain expectations towards founding teams (e.g. by valuing “male” criteria such as how aggressive they are in terms of growth and expansion). The experiences are drawn upon comparisons with male co-founders and befriended male founders who also bonded easier with similar investors.
4) Prevention vs. Promotion
Female founders got asked prevention questions (e.g. how do you want to build defensibility) and were treated differently compared to fellow male founders who received on average more promotion questions (e.g. how do you plan to internationalize and expand). Furthermore, markets addressing female target groups are quickly labelled as “ too small” or “not needed” while data showed otherwise.
Possible mitigation measures for investors
👩🏻🏫 Unconscious bias training: Biases are human. The question is more if investors are aware of them, and if they affect their decision-making. Investors can attend regular unconscious bias training to keep their biases in check and become aware.
📝 Education about hidden biases: Investors can take the Implicit Association Test (IAT) to measure the strength of associations between concepts (e.g. black people, gay people) and evaluations (e.g. good, bad) or stereotypes (e.g. athletic, clumsy).
Investment Teams
5) Female investors make a difference
62% of the participants who received VC funding talked to female investors. 58% believe that female investors make a difference in meetings. A majority of the founders ask for more female decision-makers and female perspectives in investment teams. Female founders felt more comfortable and represented with additional women on the other side of the table.
Possible mitigation measures
🌈 Diverse teams: Hire and develop internally diverse investment team members who bring in diversity of thought and different perspectives
Launching btov connect!
We know there is still a lot to do and want to do our part. In the last months, we were brainstorming on different ideas on how to address the challenges we’ve learned about in the survey. As we believe access to investors and advice should not be limited to the personal network, we strive to provide equal opportunities to all founders. After successfully finalizing the beta phase in the last weeks, during which we have executed 8 office hours sessions, we are excited to announce the official launch of “btov connect!”, an office hours program by btov, taking place on a recurring basis to create sustainable change.
Through btov connect!, we aim at connecting outstanding founders from diverse backgrounds, that have not traditionally had the most access to capital and VC advice, with our dedicated investment teams and Europe’s strongest network of entrepreneurial Private Investors.
During a virtual one-to-one session, founders can get advice on business model design, geographical markets, specific industries and structuring of fundraising rounds.
Since diversity has many aspects and gender is only one of them, our program addresses founders who are not male, not white/caucasian, LGBTQ+ or not university educated. Since btov and our corporate funds focus on digital tech and industrial tech investments, we can give the best advice to founders who have a tech-centric business model. We believe we can create the biggest value add for founders with no/angel/seed funding.
If you’re interested to apply as a founder or would like to share the initiative, please find more information here.
If you have any questions regarding the pulse check or office hours program, you can contact us at jennifer.phan@btov.vc and lm@ignore-gravity.com.
