The UK is now home to far more venture backed businesses than ever before – in 2021, a record-breaking £29.4b was invested in UK tech start-ups (www.gov.uk). Yet, only 1.4% went to all-female founding teams (according to dealroom.co). That figure is closer to 2% in Europe.
The pandemic has only exacerbated the issue further, as female fundraising has been disproportionately impacted by the complexities and challenges of the disrupted market – one reason being that women are doing significantly more domestic chores and family care.
As technological developments disrupt a variety of market sectors, a wave of different opportunities is unfolding – for female founders to blaze new paths.
Over recent decades, the tech giants have disrupted our everyday lives, transforming the way we seek knowledge, connect with each other and shop.
Take Vira Health, founded by Andrea Berchowitz, catering to women’s health via digital therapeutics. Raising £1.5m in seed capital in July 2021, Berchowitz is a female founder at a new frontier of tech disruption that is leveraging an ever-growing volume of biometric and sensor data to hack the human body and brain, to deliver personalised medicine and therapy.
When is it the right time to raise funds?
2021 saw the raising of large funding rounds in female focused luxury and lifestyle such as Vestiaire Collective (€178m) and Lyst (£85m). While some businesses can bootstrap, hitting the next level without a financial sponsor can be a challenge, both in terms of marketing, servicing a larger number of customers or building the next level of product. The required investment in human resources, technology and marketing may be untenable with existing revenues alone, even with a clear market opportunity and booming demand from customers.
Choosing the right timing is part art, part science. Businesses need to consider internal factors such as cash runway, the ability of existing teams to reach the next milestone and the defensibility, sustainability and commerciality of business model. Shifting market circumstances and external factors can drive major changes in consumer needs and behaviours.
Take Hopin, a virtual events platform valued at c. £5.7bn, just 2 years after it was founded. The timing of the pandemic meant the virtual events company was able to raise from a plethora of credible angels and VCs, such as Accel Partners, Andreessen Horowitz, Ikka Paananen and Daniel Dines, in a way that probably wouldn’t have been possible 12 months prior.
Which investors are best for your business?
Fundraising can be a full-time job. As a founder and innovator, your time is invariably best spent on the strategic direction of the business, product market fit and the overall essence of your idea. Fundraising partners can lighten the load of this time-consuming job. Their expert insider knowledge enables them to leverage a plethora of contacts to match you with the most suitable investors and partners.
The investor landscape is deeply bespoke and sophisticated, often industry specific. At Madonna Capital, we work with sophisticated equity investors – angels, HNWIs, family offices, venture capitalists and private equity firms.
With 84% of all investor types and 93% of VC Partners being men (according to dealroom.co), there is a direct correlation between funding for female founders and the diversity of investment teams. In the current market we are seeing Angels are increasingly likely to invest in women, with UKBAA citing an increase in the number of female investors in their network over the last three years.
For founders concerned about dilution, debt funding is an option if you have the required cash flow to service loan repayments, and one with the advantage of a quicker delivery vs. equity funding.
The right fundraising specialist will be able to offer you financing expertise and a range of knowledge and contacts. For female founders, it’s important to navigate the right connections that will ensure female-founded start-ups have the best opportunities to successfully grow their business.
Growth of purpose driven businesses
The movement towards purpose-driven work and business was further accelerated by the pandemic. Here, people prioritised output over facetime, flexibility and bigger questions of “how does my work help the world?” over pure profit.
As a result of the movement, there has been an emergence of many female-led enterprises, such as Nuw, a circular economy app reducing the environmental impact of fashion founded by Aisling Byrne, Beyond Bamboo Global, an online marketplace for the environmentally conscious consumer and Hanx, a sustainable sexual health brand founded by Dr Sarah Welsh and Farah Kabir.
Concurrently, the next generation of purpose-driven funds has emerged. Emerging examples include Simsan Ventures, a founder-diversity driven VC, Pink Salt Ventures, an exclusively female founder focused UK-based firm and 2150 VC, which aims to reduce environmental impact in the construction industry.
At Madonna Capital we too are a purpose driven business, dedicated to the empowerment and financing of female driven businesses, as well redressing the inequity women currently face in the private capital market.
By Pauline Li, Founder – Madonna Capital
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