Thursday 14 November 2019

Tech VC cash: no women please

Dr Nora Khaldi is founder of a medtech firm that landed a €17m funding round.
Dr Nora Khaldi is founder of a medtech firm that landed a €17m funding round.
Adrian Weckler

Adrian Weckler

Talk to many in Ireland and you'll hear that it's a good time to be a female tech founder.

The facts tell a slightly different story.

So far this year, less than 1pc of available venture capital (€310m) has gone to firms founded (or co-founded) by women. On a rolling 12-month basis, the figure is a bit better, at around 5pc.

But there is no apparent breakthrough happening for female tech entrepreneurs with ambitions to get serious funding.

The reasons given for this within the tech and VC industries haven't changed much in recent years. They include:

1 'There aren't enough women in tech courses';

2 'I'd happily invest in a female pitch but I just don't see any';

3 'Women don't pitch aggressively enough';

4 'Women are more risk averse';

5 'They don't have enough experience'.

To be sure, venture capital isn't the only source of funding.

Enterprise Ireland points out that a third of its grants - up to €10m - last year went to female entrepreneurs.

But this isn't the same at all. These grants are basically seed money allocations - a few tens of thousands in most cases. It's enough to allow someone to devote a few months to an idea. Maybe they can even hire someone. But it's nowhere near the kind of business investment that's comparable to a €3m, €8m or €15m funding round.

And it's public money. It is removed from the investment climate which ultimately prevails.

So trying to equate a few €50,000 grants with multiple €5m venture investments isn't a realistic comparison.

There are, of course, outliers.

Dr Nora Khaldi is the sole founder of the medtech firm Nuritas, which landed a €17m round last year.

Sinead Fitzmaurice is one of three co-founders (the other two are male) of TransferMate, a Kilkenny-based payments firm that closed a €30m funding round in 2017.

And I can think of other Irish women who, although raising much more modest sums, have still navigated the venture world productively in the last two years.

These include Mary O'Brien's remote health startup VideoDoc (€2.5m), Aisling Teillard's Tandem HR Solutions (€2m) and Triona Mullane's mAdme (€1.4m). They also include Nikki Lannen's gaming virtual reality startup WarDucks (€1.3m) and Lisa Ruttledge's FoodMarble (€1.45m).

But look again at the overall figures. These rounds are a drop in the ocean.

Even if one in 10 VC-backed companies here is female founded, the actual amounts they get are a fraction of what male counterparts land.

Over the past three years, the average Irish funding round in a male-led company has been between €5m and €6m, compared to amounts between €500,000 and €1m for female-led firms.

Even this understates the imbalance. The 'female' figures are those startups with at least one woman founder. TransferMate has three founders, most of whom are male. Its chief executive is also male. But because it has a single female co-founder, I'm chalking its €30m into the 'women' column.

Patently, none of this will change overnight.

But will it change at all? If so, what are some of the transformative triggers?

"Very little will change until we have more partners in venture capital firms and more women on the investment panels," says Dr Patricia Scanlon, founder and chief executive of Soapbox Labs, a voice-technology specialist firm which has raised €3m in recent years.

But talking to venture firms around Dublin in recent months, many just don't care. This is private money being placed, some argue, not a social inclusion programme.

Others flatly deny that there is a problem to begin with, claiming that they are blind to gender and it purely comes down to the strict merits of a startup and its pitch.

But some have started to acknowledge an unconscious bias and are trying to change it.

Frontline Ventures, an active early-stage venture capital firm in Dublin, has begun changing its modus operandi to try to neutralise unintentional biases.

"One thing we're acutely aware of in Frontline is that we have five white male founders," says William McQuillan, a partner in the company.

"We don't have much diversity. We know that this could send an adverse message to anyone who is thinking about applying to us, but who feels they're different.

"So we've really seriously started to look into issues such as unconscious bias and trying to understand it."

To this end, McQuillan says that he has designed a course targeted at venture capital firms to explore and deal with those biases.

"This would be everything from how we recruit people to deal flow to decisions made and the investment team," he says. "We've already held the course twice in London and had 22 different partners from different firms attend. We're now finalising a date for a Dublin event and hope to get as many investment partners here to it too."

McQuillan says 20pc of the companies his firm has dealt with in the past 12 months has a female founder. He also says that a quarter of the company's investments have involved a female entrepreneur.

Even so, Frontline - like most Irish venture firms - doesn't have a female investment partner.

This isn't just an Irish issue.

In the US, which sets the pace for venture capital activity, just 2pc of venture capital last year went to a company founded solely by a woman or women. In Britain, it's under 10pc.

Even discussing the issue can be tricky. Many female entrepreneurs I talk to don't want to be considered as diversity statistics.

But there is clearly a massive gender gulf here.

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