VC investment for UK's female fintech founders up 6% in 2020

VC investment for UK’s female fintech founders up 6% in 2020

Written by Ruby Hinchliffe
22nd January 2021

Female-founded fintechs accounted for 17% of the UK’s total fintech venture capital (VC) investments over 2020, up 6% from 2019.

The UK’s fintech scene raised $4.1 billion in VC funding last year, which means female founders landed more than $697 million of this.

Female-led fintechs entered the COVID-19 crisis with the longest funding runway of the sector

Two years ago, just 11% of fintech VC funding was going to UK-based female founders. The data, published by Innovate Finance this week, draws from PitchBook statistics dated 8 January 2021.

Whilst the six-percentage point increase is significant, the data doesn’t go further to discern female founders by race.

As an Extend Ventures report showed last year, between 2009 and 2019 a measly 0.24% of venture capital went to teams of Black entrepreneurs in the UK.

Out of those, only one Black female founder raised Series A funding across the entire ten-year period. Whilst these latter statistics aren’t specific to the fintech industry, they raise an important question as to the race-split of the percentage.

Why still a minority?

The reasons why female founders, particularly Black female founders, still make up a minority of fintech VC funding in the UK – and globally – are many.

A Harvard Business Review (HBR) study last year found that without diverse leadership, something the financial sector still significantly lacks, women are 20% less likely than straight white men to win endorsement for their ideas.

As for Black women, part of the problem comes down to countries’ racist wealth gaps. US firm Precursor Ventures found last year that because of America’s wealth inequality, Black women generally hold 10x less capital themselves, a big decider over whether they get general partner roles in VCs.

So, without Black women on VC boards, it’s no wonder Black female founders are landing such small portions of fintech VC funding.

It’s no different in the UK. A report by Runnymede Trust found Black citizens sit in the highest unemployment rate, are most likely to have a household income below £400 a week, and just 8% of their elderly community drew any income from a personal pension.

Female-led fintechs more prepared for COVID-19

Female founders have proven, on average, that they’re a safer bet than their male counterparts.

Female-led fintechs entered the COVID-19 crisis with the longest funding runway of the sector, according to KPMG’s Fintech Focus study.

Some 78% of them had 18 months or more of cash in reserves to weather the economic crisis. That’s compared to the nearly half of all fintech, the majority founded by men, which started the pandemic with less than 18 months of funding remaining.

Anton Ruddenklau, KPMG Fintech’s global co-head, said last July that in 2019 fintechs with a female founder or co-founder “typically achieved 113% higher returns on paper for investors”.

And in 2020, Ruddenklau says female founders made up four of the top 20 fintechs with the highest internal rates of return (IRRs) as of their latest funding round.