Women still struggle to access VC funds. What needs to change?

To receive the Vogue Business newsletter, sign up here. When Victoria Prew started fundraising for her fashion rental business, Hurr, male investors constantly asked whether the concept was prompted by her love of dresses. “It was frustrating, because I care far more about scalability, circularity and changing consumer behaviour in real time,” she says. “I shut down those conversations very quickly.” Unconscious biases and gendered assumptions often cloud the picture for women making investment pitches, complicating how women founders access venture capital funding. Women also face barriers to taking on decision-making roles in the investment industry. In the US, less than 10 per cent of partners at the 100 largest venture capital firms are women, according to Matt Krentz, leadership and diversity, equity and inclusion chair at Boston Consulting Group (BCG). “This shrinks further when you take into account intersectional identities such as race, sexuality and disability.” Several companies with women founders or co-founders, have secured funding in the last year, including circular fashion businesses Vestiaire Collective and Cocoon Club. However, women entrepreneurs and investors alike say this perceived progress is misleading, and barriers remain in place. BCG research, as seen by Vogue Business, has found that historically, less than 5 per cent of VC funding has gone to women-owned or women-led businesses. In some cases, there is a backwards shift. According to software and data provider Pitchbook, this figure shrank to 2.2 per cent in 2021, despite the creation of women-centric funds such as Female Founders Fund, narrowing women’s already small shot at funding. “The prevailing narrative is that there is so much money out there and it’s impossible not to raise, but that depends on what market you’re in, what kind of business you’re running — investors often want tech companies without physical inventory — and what gender you are,” says Joy Howard, a former executive at Patagonia who founded a membership-based outerwear brand called Early Majority. Moving money into more diverse hands could have a ripple effect on the overall business ecosystem. Women investors are twice as likely as men to invest in a company with at least one woman founder, and those companies typically hire 2.5 times as many women, according to research from Kauffman Fellows. Companies with both a female founder and a female executive hired six times more women. “Capital is an incredibly powerful change agent,” says Deborah Benton, founder and managing partner of US firm Willow Growth Partners, which invests in early-stage consumer brands including Kosas and Uoma Beauty. “There is a tremendous opportunity for VC firms and institutional limited partners to support diverse fund managers and diverse businesses.” Barriers to access: Biases in the boys’ club First impressions are important, particularly because many investors rely on personal networks to find new businesses. “I have to carefully consider how I present myself as a Black woman in the business world,” says Josephine Philips, whose London-based app Sojo — dubbed the “Deliveroo of clothing repairs” — recently raised £300,000 and will soon close another round. This impacts her choices about her personal wardrobe and even her hair: during the fundraising period, she kept her hair style short and avoided any changes in case it threw off investors. “There are a lot of nuances to being an outsider,” notes Eshita Kabra, whose rental startup By Rotation just closed a $3 million seed round led by Redrice Ventures. “I’m from Rajasthan; as an immigrant in the UK, I struggled to break into the UK angel investing scene because it is so heavily based on personal networks and connections.” Disabled entrepreneurs tell a similar story. “We have come up against a lack of education and experience of what disability entails, and how big the numbers are,” says Maria O’Sullivan-Abeyratne, founder of soon-to-launch adaptive fashion retailer Adaptista. She says investors can make pitching more accessible by offering reasonable adjustments for disabled entrepreneurs — such as pitching while sat down, adding captioning, or taking two people in if one struggles with recall. There is a particular jargon and etiquette to investing, adds Sophia Wang, who was a dancer and artist before she co-founded San Francisco-based mycelium startup Mycoworks, which now partners with Hermès on its vegan leather alternatives. This pressured her to “be someone else” during the fundraising process because her emphasis on “deep listening” made investors devalue her role in the partnership versus louder colleagues. When current CEO Matthew Scullin (a white male) joined in 2017, it allowed Wang to be herself. “Diversifying your team gives you space to lean into your personal expertise and approach,” she explains. “Investment is a microcosm of systemic imbalances and unconscious biases that pervade the entire world.” Mind the mentorship gap There is a confidence gap among women founders, which is both caused and exacerbated by biases among investors, believes Krentz of BCG. He says women are challenged more on business claims and face more aggressive questioning of their technical expertise. That leads some women to under-sell their businesses and receive less funding. “Women tend to over-prepare and under-sell their market potential,” says Bettine Schmitz, partner and founder of German female catalyst fund Auxxo, which has raised $15 million so far and focuses on co-investments in seed and pre-seed rounds. “Investment is not about the current worth of the company — it’s about the potential worth in the future.” This confidence gap has spurred support networks and knowledge-sharing communities for women founders. Philips, of Sojo, says her fundraising strategy was shaped by a webinar by The Stack World, a community-led media platform developed by serial beauty tech entrepreneur Sharmadean Reid, one of less than 20 Black female entrepreneurs in the UK to access VC funding over the last decade. Hurr’s Prew researched and contacted women founders two to four years ahead of her, who helped her draw up contract terms and guided her to tools such as Crunchbase Pro and Docsend. Her advisory board includes diverse names, such as Michelle Kennedy, founder of Peanut, a social media space for women. Grace Beverley, who recently raised $5.7 million in seed funding for her UK activewear brand Tala, shared her pitch deck on YouTube to help other entrepreneurs. Her angel investors include Deciem CEO Nicola Kilner and Peanut’s Kennedy — women she met through conferences, social media connections and via Tala’s executive recruitment process. Potential for change Entrepreneurs interviewed by Vogue Business emphasise the importance of choosing the right investors — “a bigger decision than marriage”, as more than one of them put it. Investors with diverse partners appealed most. “It’s about their values and beliefs, and how open-minded they are,” says Mounaz Abdel Raouf, co-founder of Egyptian accessories label Okhtein. The brand is backed by Bidayat, an investment platform founded in late 2021 by Rachid Mohamed Rachid, CEO of Qatari investment fund Mayhoola (which owns Valentino and Balmain), to support emerging brands from the Middle East, Africa and Europe. Of the five people on Bidayat’s investment committee, two are women, including CEO Tugba Unkan. Some firms are pursuing unconscious bias training for investors to try and standardise their treatment of entrepreneurs. There’s plenty more to do, says Unkan. “We need fashion education to include business mentoring and entrepreneurship. I would also like to see industry prizes that identify future talents offer more long-term support to winning designers. The chain from prize-winner to successful business is broken.” Specialised funds have started to target underrepresented entrepreneurs, hoping to redress the balance of investment. “We need more diversity in all funds, not just those oriented to women founders,” says Anu Duggal, founding partner of Female Founders Fund, which is managing $100 million across family offices, strategic female founders and institutional investors. The fund publishes educational content on its website, including advice on fundraising, pitching and term sheets. In the UK, Young Enterprise, a national charity, is working with school-aged children to develop entrepreneurial skills and start shaping future founders before gender biases kick into action. “As well as business experience, we provide access to networks and relatable role models,” explains CEO Sharon Davies. “Ideas about money and enterprise are set as young as seven, so you have to build that pipeline early.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: EU moves to legislate sustainable fashion. Will it work? Fashion must cut greenhouse emissions in half, says UN climate group Where fashion resale is headed in the next two years

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