Monday 30 May 2016

Women are being left far behind in battle for startup venture capital

Published 28/01/2016 | 02:30

The average individual investment to female-led companies is ten times less than to those run by men
The average individual investment to female-led companies is ten times less than to those run by men
Jayne Ronayne CEO of 'Konnect Again' in the CHQ Building.
Dorothy Creaven

Under 3pc of tech venture capital in Ireland goes to companies led by women, with the average individual investment ten times less than for male-run firms, an Irish Independent investigation shows.

And while almost one in eight VC-funded tech firms here has a female co-founder, only one in 20 has a female chief executive.

The research, from figures released by the Irish Venture Capital Association, shows that the average investment for a VC-funded tech firm with a female founder last year was €911,000, while the average for a company with a female chief executive was €591,000.

This compares to €5.46m per investment for companies founded and run by men during the same period.

Of 88 companies to receive venture capital funding in Ireland last year, 12 list a woman as a co-founder while just four list a female chief executive.

Despite rising numbers of female tech founders in Ireland, the research shows a lack of female participation in top executive roles. According to the figures last year, two-thirds of the tech companies founded or co-founded by women also choose a male chief executive to run the business. Of the four firms run by a female chief executive, all were founded by women.

A further nine companies, while started and run by male entrepreneurs, list female executives in senior positions such as chief scientific officer, financial controller, chief marketing officer or chief operating officer.

"It's a bit of a systemic issue," said Jayne Ronayne, co-founder and chief executive of KonnectAgain, a Dublin-based startup that connects colleges with alumni and which raised €300,000 in funding last year. "There are still a low number of female entrepreneurs that get interest from funders. It's the same in places like San Francisco.

"Calling a spade a spade, it's widely known that the average male investor will tend to invest in the same type of person, with the same upbringing or from the same college, as him."

Ronayne, whose company has been growing over the last 12 months, says that many investors do try and focus on the company as opposed to the gender of its founders. But sometimes, she says, the differences become a barrier.

"Other female entrepreneurs have noticed that they get labelled as being too aggressive if they go actively seeking investment. I'm not sure it's getting worse, it's probably about the same as it has been before."

Other successful Irish female entrepreneurs agree that there is a big gulf in senior executive roles between men and women in the tech sector. However, not all come up against gender-based bias.

"While I agree there is a massive imbalance in the numbers of male and female C-level executives, entrepreneurs and board members, I personally don't experience much negativity being a female entrepreneur or CEO," said Dorothy Creaven, co-founder and chief executive of Element Wave, a Galway-based analytics, gaming and mobile marketing startup. "I've gone through the fundraising process a few times recently. I haven't experienced any obvious negatives, questions or concerns because I'm a female CEO," says Creaven. Her company has racked up significant deals with Bwin, Colossus and the Irish Greyhound Board.

In the US, recent figures paint a mixed picture of VC funding for tech companies run by women. According to Female Founders Fund, the number of female-led tech firms that attracted 'series A' funding (between $3m and $15m) shrank by 30pc last year in the country's most important tech market, San Francisco. Of 204 Silicon Valley startups that received such funding last year, just 16 of them (8pc) were led by women, according to research from the organisation.

This was somewhat mitigated, Female Founders Fund said, by a rise in female-led funded startups in New York and Los Angeles.

But in wider industrial boardrooms, a glass ceiling appears to remain in place. A recent study showed that the number of female chief executives of S&P 500 Index companies fell from 25 to 21 last year.

"Despite all of the attention placed on increasing the number of female executives at American companies, the needle on the gender gap has hardly moved," said Pavle Sabic, director of market development at S&P Capital IQ. "The gender gap at the CEO level of S&P 500 companies is not closing. The growth rate for new female CEOs is only 1pc every two years."

However, some see a brighter picture emerging.

"There are definitely still barriers," said Brian Caulfield, chairman of the Irish Venture Capital Association.

"But I can see change happening. The number of very high quality companies that I've seen with female founders or female CEOs has expanded pretty dramatically here in the last few years."

Caulfield, who is also an active investor at venture capital firm Draper Esprit, said that some institutional moves have helped cause movement in the number of female executives going for funding.

"I think it's interesting that when Enterprise Ireland launched its Competitive Start Fund for Female Entrepreneurs, there was a jump in applications. And that happened even though the offering was identical to the original generic offering. It created an opportunity for some women to self-identify as entrepreneurs."

Caulfield said that he expects to see more female-led companies achieve funding rounds in the near future.

"I think we're going to see progress there," he said. "Apart from anything else, not to have progress would be a scandalous waste of half the talent pool."

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