The Future Fund is not for diverse founders — but here’s how to change that
Following the recent announcement by the UK government of a support package for startups, concerns have been voiced by the startup community centered around its failure to cater for diverse founders.
Future Fund, an intervention led by Save Our Startups (SOS), is a £250M pot of match funding for startups, to help them stay afloat during the coronavirus crisis. However, to unlock this funding startups must be able to secure an equal amount of funding from private investors and must have raised £250,000 in the past.
It is this criteria which has caused a number of investors, founders and D&I advocates to call out Future Fund’s shortfalls. “Whilst on the surface this seems like a great gesture, my concerns lie with the increased barriers to entry for under-ventured founders,” says Charmaine Hayden, partner at Goodsoil VC.
Due to SOS and the unrelenting efforts of Brent Hoberman OBE (Chairman, Founders Forum Group), Saul Klein (Co-Founder and Partner, LocalGlobe), John Spindler (CEO, Capital Enterprise) and others the Future Fund deployment shows that the government is willing to listen to the startup ecosystem. This is welcomed by the community, and marks a positive start — but we are concerned that inclusion has been put on the back burner and that those in government have not listened to a diverse set of voices at one of the toughest times in history. Women, let alone people of colour, are notably absent from the lobby group’s loudest voices.
The Future Fund, by design, sadly only heightens systemic barriers that exist within the investment community which is dominated by privileged white males, and built upon nepotism and classism. (39% of London’s VC firms don’t have any women on their investment teams, while one in five UK VCs went to Oxford, Cambridge, Harvard or Stanford, according to Diversity VC.) These systemic biases mean that those from diverse backgrounds are less likely to have raised the £250,000 minimum funding required, due to the culture of “warm introductions” and lack of access to friends and family rounds.
“This industry has traditionally overlooked underrepresented founders — and talented teams without these networks are at a significant disadvantage and excluded from funding yet again,” says Dama Sathianathan, partner at BGV.
This long-standing culture has given birth to statistics which highlight the exclusion of diverse founders: black female founders receive just 0.02% of venture funding in the US while less than 9% of senior leaders in tech are from BAME backgrounds. There is still a concerning dearth of data around diversity within the UK startup ecosystem.
Check Warner, partner at Ada Ventures and CEO of Diversity VC, shares a compelling list of suggestions for the Treasury to consider to ensure that it does take diverse founders’ needs into consideration. She suggests:
- VC funds and angel syndicates commit to diverse practices through signing up to charters such as the Investing in Women Code
- Angel syndicates should be included within the ‘eligible’ groups of investors which founders can match these loans against
- Matched convertible loans should be compatible with SEIS and EIS funding
In addition, Anthony Rose, CEO, and Co-Founder of Seedlegals, also highlights how the majority of startups won’t be eligible for Future Fund, and points out the ugliness of the deal terms.
David Fogel, Co-founder, Alma Angels and ADV, argues previous VC backed funding should not be the only indication used to determine the success of a startup. If the purpose of the fund is to increase the likelihood of startups to thrive after this crisis, The government criteria should consider the actual viability of a startup to reach a strong financial position within 12 months — diverse founders are well known for building sustainable business, known as Zebras.
Over the past year at YSYS, we’ve consulted a number of London accelerator programmes, such as Sports Tech Hub, Tech Nation, Geovation, and EIT Food on how they can design startup programmes which foster diversity and inclusion in conjunction with our community.
Building upon our practices alongside our community Members, Partners, and Allies we’ve outlined our own recommendations to The Treasury to consider when launching the Future Fund in May.
Consult with diverse founders too and investors through focus groups, These can be hosted virtually with 10–50 individuals from different backgrounds and lived experiences, and will enable the government to understand the impact of their spend on these groups.
“It’s hard enough fundraising as a diverse founder — let alone having to put together a round of private money in such a short window of time,” says Nii Cleland, Founder of Flair Football.
Run a survey to gather a broader and more accurate overview of the startup community’s thoughts on the design of the fund. Ensure that the survey reaches a wide group of people — and goes beyond London. Research platforms such as CultureTool help organisations craft surveys and reach diverse audiences. These surveys can be sent online or via the post — this flexible nature means hard to reach groups and those without digital access can have their concerns heard.
Build relationships with grassroots communities that support diverse founders to ensure when the fund is launched, they are aware of the opportunity. There are a number of diverse startup communities such as YSYS, Foundervine, Colorintech, Muslamic Makers, 10x10 and more (check out Sifted exhaustive list of diverse startup communities here) whose mission it is to champion diversity and inclusion within the sector.
“There are many community groups in the startup ecosystem that can help ensure the Future Fund doesn’t leave diverse founders out, but the scheme needs to be designed to help them,” says Ashleigh Ainsley, Co-Founder of Colorintech.
When selecting which startups are eligible for funding, ensure the judging panel is diverse. The variety of skills, experiences, and backgrounds among the judges will mean that they can learn from each other, understand different mindsets, make connections, and also spot things others may not, as a result of their biases. Additionally, communicate transparently about the Investment Committee and commit to publishing data on its impact and the startups who receive funding.
“It is crucial that the panel of decision-makers for the deployment of the Future Fund are representative of the wider ecosystem and diversity and inclusion is considered as a priority. Otherwise, we risk compounding the challenges underrepresented founders already face accessing capital,” says Yvonne Bajela, Founding Member and Principal at Impact X Capital.
“As with all movements, action and financial commitments are louder than pledges or kind words,” says Thish Nadesan, COO at Cleo AI.
Diversity and inclusion needs to be intentional and not an afterthought. Given that, we suggest the Treasury or the British Business Bank develops a D&I Action Plan for the Future Fund, along with angels and VCs. At YSYS we have a useful template to start with which you can download HERE.
Overall we’re excited by the impact and signal of the Future Fund and the government’s commitment to supporting entrepreneurs building the future, but if we don’t ensure that it is a fair, accessible, and equitable fund, it will be one step forward and two steps back. YSYS, CGV, ColorinTech, Create Jobs and others support The Treasury with implementing the above recommendations. We know this will require a community effort, and alongside SOS, Diversity VC, and others, we are positive we can build a future fit for all.
Contact: Deborah Okenla, Founder and CEO, YSYS — email@example.com
Thanks to the following, who contributed to the above recommendations:
Amy Lewin, Deputy Editor, Sifted, Andy Davis, Venture Partner, Backstage Capital, and Atomico Angel Fellow, Ashleigh Ainsley, Co-Founder, Colorintech, Anthony Rose, CEO and Co-Founder, SeedLegals, Andy Ayim, Founder Angel Investing School, Charmaine Hayden, Partner, Goodsoil VC, Cristiana Camisotti, Entrepreneur, and Advisor, Check Warner, Partner, Ada Ventures and CEO of Diversity VC, Dama Sathianathan, Partner, BGV, David Fogel, Co-founder, Alma Angels and ADV, Daisy Onubogu, Head of Scouts, Backed VC, Denzel Walter, Partner, CGV, Deborah Okenla, Founder and CEO, YSYS, Dirk Bischof, Hatch Enterprise, Hemant Bedarka, Partnerhsip Manager YSYS, Kike Oniwinde, Founder, BYP Network, Nii Cleland, Founder, Flair Football, Sheeza Shah, Social Entrepreneur, Oliver Benjamin, Director of Employment and Skills, A New Direction and Create Jobs, Sarah Drinkwater, Director and Lead, Tech and Society Solutions Lab, and Atomico Angel Fellow, Thish Nadesan, COO, Cleo AI and Yvonne Bajela, Founding Member and Principal at Impact X Capital