Bringing more women to the (cap) table inside startups

Before entrepreneur Molly Johnson-Jones started fundraising for jobs platform Flexa, she was “very much against symbolism”.but experiencing Barriers facing women She changed her mind when she raised first-hand funding from VCs.

Now, she sees it as “one of the only ways” to eliminate an unfair playing field in a startup environment so heavily dominated by white men at the founder and investor level. For her, that means not just hiring women, but finding female investors.

Flexa has just raised a £2.3 million seed round led by Neglected founder-focused venture capital firm Ada Ventures, and half of its cap table are female investors — the result of a months-long effort by Johnson-Jones. And as part of this round of investment capital, 76% came from women or women-run funds.

But, frustratingly, Flexa is an outlier. While data on the diversity of start-up cap table diversity is scarce, data platform Beauhurst estimates that only 20% of shareholders in seed- and growth-stage UK companies are women.

While a more representative cap table isn’t common in European tech, it’s not unheard of.In recent years, startups across Europe such as legal platform Valla, hybrid work management company Fashal and creator community Passionflower All raised rounds made up of different investors.

More and more founders are going out of their way to find investors from underrepresented communities because they believe these people can bring a different perspective. Many founders believe that if they are successful, they will also help a more diverse group of investors gain new wealth that can then be invested in the next generation of tech companies.

However, startups with different cap tables are the exception. So why are they so rare?

Looking for female investors

Flexa’s purpose is to give job seekers a better understanding of the company’s culture and flexible work policies when choosing which positions to apply for, co-founder and CEO Johnson-Jones told Sifted.

Most job platforms don’t allow you to filter roles based on culture-centric criteria, like how many days a week you need to work, or whether you can bring a dog into the office, she said. That’s where Flexa comes in.

Flexa lets job seekers search for jobs based on company flexibility
Flexa lets job seekers search for jobs based on company flexibility

The UK-based startup is approaching half a million users and 160 companies paying to list on the platform – hoping to show off their flexible work policies will attract the best candidates. Competition is growing job market.

Launched just weeks before the UK goes into lockdown in 2020 – the start of a sea change in the UK The way we think about work Flexibility of roles has become a must-have — playing a startup role in getting job seekers to use the platform.

It also broke down some barriers to finding female angels, Johnson-Jones told Sifted.

“Blockades have made people more willing to connect online,” she said. “I’ve met a lot of great investors [that way]when we started to be very open about the fact that we wanted a female-majority cap table, [investors] from woodwork. “

Still, it was “very difficult” to find female angel investors, and Flexa’s initial £250,000 pre-seed in 2020 was led by men.

“Everyone says ‘you’re crazy’. But I think raising money is like applying for a job: if you really tailor your application, you’re more likely to get it”

“This is our first exposure to the VC world, and we simply don’t have the network or awareness we have now,” Johnson-Jones said.

Those original angels introduced her to a scout at Ada Ventures, who then introduced her to other female partners in Europe, and so on. When Flexa raised a seed round, Johnson-Jones decided to only reach out to women-focused VCs.

“Everyone said ‘you’re crazy,'” she told Sifted. “But I think raising money is like applying for a job: if you make the application really tailored, you’re more likely to get it.”

The tailored approach bears fruit.

“We work with far fewer VCs [for our seed round] “By targeting VCs that we felt had a good cultural fit with Flexa, we were able to have fewer, higher-quality conversations and close this round sooner than when we cultivated pre-seed,” Johnson-Jones added. . ”

The importance of the right network

However, building a network of female angels and VCs through introductions is trickier for others.

Co-founder and chief executive Anna Maybank told Sifted that after raising £5m since 2019, 17% of the cap table on job site Breakroom are women. She added that the startup has struggled to build a more representative cap table despite reaching “a substantial number of female investors” with each round.

“I found two problems,” Maybank said. “One is harder to find [women investors] first. Your best connections come from introductions, and I’ve found that people are more likely to introduce me to a guy. “

Another is that, in her experience, women are more likely to say no.

“It’s hard to break into a circle that you’re not connected to, and it’s almost all men”

“Sometimes it’s because they say they can’t add anything to the business,” she added. “I think there’s a little bit of classic impostor syndrome.”

The difficulty of finding a strong network of female investors is that Valla co-founder and CEO Danae Shell (which raised a £585,000 seed round earlier this month) also ran into a problem.

“It’s hard to get into a circle that you’re not connected to, and that circle is almost exclusively men,” she told Sifted.

“We all know how important warm referrals are in the VC world, and I [Valla’s initial first pre-seed round in 2020],” Shell added. “My whole job now is building the network because I realize I have a lot to catch up. “

Danae Shell, co-founder and CEO of Valla
Danae Shell, co-founder and CEO of Valla

For Valla’s salary scale, Shell’s outreach has paid dividends: 72 percent are now women and 33 percent are people of color.

Shell said that when it came to raising money from a diverse group of people, Valla looked beyond a minority of seasoned investors, half of whom had never put money into a startup on the startup’s capital table.

When Audrey Barbier-Litvak raised 1 million euros for her Paris-based startup Offishal, convincing starters to forgo cash was also a failed route. Its 60% cap is women – 80% of whom have never invested before.

Barbier-Litvak tell sieve Given that there are few female entrepreneurs in France, she turned to women with no investment experience.

“I got in touch with some smart, strong and thoughtful female executives that I’ve met in my 20-year career, and they could each put 20,000 to 50,000 euros in,” she said. “Gradually, my potential investments The network of readers starts to grow.”

room for improvement

Despite all the positive actions these startups have taken to level the playing field, there is still a lot of work to be done—especially in achieving more diverse representation beyond gender.

“There’s a huge problem with racial diversity that needs to be urgently addressed,” said Flexa’s Johnson-Jones. “Underrepresentation of any minority in venture capital directly affects who gets funding, creating a vicious cycle where some of the best founders and products are ignored.”

86% british angels are white 83% European PE and VC veteran. Between 2009 and 2019, only 0.24% Venture Capital Went to the Black Entrepreneur Team.

“If I’m going to truly meet the diverse needs of my clients, my investors need to reflect that diversity”

“There’s a lot of responsibility on the VC side to make sure they’re investing in diverse founders,” Johnson-Jones told Sifted. “But founders should be aware of who they’re putting on their payroll because if you end up being a unicorn and quit, they’re the ones who will benefit.”

Likewise, Offishal’s Barbier-Litvak told Sifted that her investors are “highly educated white women from affluent backgrounds.”

“While I may have achieved a level of gender diversity unheard of in tech, I’ve underperformed on other measures of diversity,” she said.

“If I’m going to truly meet the diverse needs of my clients, my investors need to reflect that diversity — including racial, cultural and socioeconomic diversity, among others.”

Kai Nicol-Schwarz is a reporter for Sifted.He covers health tech and community news, as well as from @NicolSchwarzK