Why aren’t funders investing in startups founded by women?

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1. 0:06Speaker 1: Kia ora, I'm Chelsea Daniels and this is The Front Page, a daily podcast presented by the New Zealand Herald. New
2. 0:16Speaker 1: Zealand investment in women-only founding teams has.
3. 0:20Speaker 2: More than tripled in a year, but.
4. 0:23Speaker 1: A huge.
5. 0:24Speaker 2: Gender gap remains.
6. 0:26Speaker 1: Gender Investment Gap, University of Auckland Business School data shows these teams are still receiving less than six cents in
7. 0:34Speaker 1: every investment dollar, while male teams get 70 cents. And while there's been more investment in women-led businesses, it starts
8. 0:42Speaker 1: falling away at later funding stages. So why does it all matter? Today on the front page, founder of tech startup Dispute Buddy, Jenny Rudd, is with us to discuss.
9. 0:56Speaker 2: So, Jenny, there seems to be.
10. 0:58Speaker 1: Progress, but there's cautious optimism as well.
11. 1:02Speaker 2: Why is that? Well, I think like anything, nothing's linear, is it?
12. 1:06Speaker 3: I think when we're talking about how much funding goes to women only teams of startups and by startups, we're talking about high growth businesses, not necessarily about small to
13. 1:16Speaker 3: medium sized businesses. like the numbers are still so small. Sure, we doubled from last year. There was 3% of the actual, all of the dollars last year went to women-only teams.
14. 1:27Speaker 3: And this year, 6% of them have gone to women-only teams.
15. 1:30Speaker 3: But if you look at the mixed gender teams, so startup, founder teams that have got women and men in them, that has drastically reduced from 36% to 25% of all
16. 1:40Speaker 3: of the capital has gone them. And that shift has largely gone to men-only teams.
17. 1:45Speaker 1: What's the significance of separating women-only, men-only and mixed, I suppose?
18. 1:51Speaker 3: I think if you lump mixed gender in with either men-only or women-only, it really occludes what's actually happening. I mean, I know that some funds like Blackbird Venture Capital, they
19. 2:02Speaker 3: always talk about, we invest this much in women-founded teams and they lump together women-only founded teams. So like for me, in my business dispute buddy, I'm the only founder, women-only.
20. 2:14Speaker 3: And then there'll be other founder teams like Sharesies, where there were six original founders.
21. 2:20Speaker 2: And I think two, maybe three, two or three of them.
22. 2:22Speaker 3: I know Brooke was one of the founders, so there was maybe one or two of them. But there are other founder teams where there might be four founders and one of them is a woman.
23. 2:30Speaker 2: And that really kind of....
24. 2:33Speaker 3: Really kind of muddies and covers up what's actually happening for gender. So it's much more useful to separate them.
25. 2:40Speaker 3: The other thing that needs to be thought about is people that don't recognise themselves or don't identify as men and women. At the moment, we have those people in
26. 2:51Speaker 3: mixed gender, but that's also largely because we haven't.
27. 2:55Speaker 2: Been able to.
28. 2:57Speaker 3: really accurately measure anyone who's non-binary.
29. 3:00Speaker 2: And declaring themselves the founder. So that's one of the next stages.
30. 3:03Speaker 1: Do the numbers take into account, I suppose, perhaps how much capital one business is trying to raise than another?
31. 3:11Speaker 1: So could it be that women-only teams are seeking less capital now?
32. 3:16Speaker 2: Or something?
33. 3:17Speaker 3: Well, I think it's more that women-only teams are completely underestimated and given less capital by venture capital firms. So,
34. 3:27Speaker 3: for instance, if you look at the number of deals that women-only teams get, so the If you think about, like, if you look at it like this, let's say, for instance,
35. 3:39Speaker 3: my business dispute buddy was going for funding and I went around all the different venture capital firms and all the different angel groups and I got funding from some of them, that would count as like one deal.
36. 3:49Speaker 2: Let's call that one deal.
37. 3:51Speaker 3: And then let's look at, well, how much money did they invest in me? It's not necessarily how much teams ask for, it's how much they are able to raise.
38. 3:59Speaker 2: And so what we can.
39. 4:00Speaker 3: See is that whilst women-only teams raised Like the number of deals represented 12% of all deals last year. They only were given 6% of all capital.
40. 4:12Speaker 2: And that's crazy. Why would we.
41. 4:14Speaker 3: Give exact team businesses that are building high growth businesses half the amount just depending on their gender? For instance, when we know that all the data tells us that
42. 4:26Speaker 3: women-only founder teams actually are much more capital efficient, they generate more revenue on less investment, they exit faster, they're
43. 4:36Speaker 3: leaner with their capital. So it's a really poor idea to underfund women-led businesses. Generally speaking, VCs give women less money.
44. 4:45Speaker 3: One of the reasons for that is well documented. It's because when you're in a pitch, So the startup founder goes to the VC and the VC asks them some questions around like, what are you going to do with the money?
45. 4:57Speaker 2: And what's your market like? And things like that.
46. 5:00Speaker 3: Research has shown us from Harvard Business Review that founders get asked two types of questions. One's called preventative and one's called promotional questions. Data also shows us preventative questions
47. 5:10Speaker 3: look like things like, how are you going to keep your costs down? How are you going to protect yourself against competition? Promotional questions look like things like, what's the market opportunity for this?
48. 5:19Speaker 2: What's the biggest outcome that you could get?
49. 5:22Speaker 3: Data shows us that men get asked more promotional questions, and also each additional promotional question that you get asked you will receive more funding.
50. 5:30Speaker 2: That's what the data shows us.
51. 5:32Speaker 1: I'm playing devil's advocate here. What would you say to people who say, well, you look, this is PC gone mad.
52. 5:37Speaker 1: What if men just have better ideas, better business pitches?
53. 5:40Speaker 1: What if men just, you know, better in those kind of situations? Why should women be prioritised? How would you reply to those?
54. 5:50Speaker 3: Clearly women aren't being prioritised and we're not asking to be and no one should prioritise women, but they are prioritising men and they also shouldn't be. The data shows
55. 5:58Speaker 3: us that men-only teams underperform compared.
56. 6:02Speaker 2: To women-only founder teams.
57. 6:04Speaker 3: And so if that's what the data shows us, then it's just dumb to not invest in women-only founder teams.
58. 6:10Speaker 3: So it doesn't really matter to me whether people.
59. 6:14Speaker 2: get.
60. 6:14Speaker 3: Frustrated about that kind of thing i'm just like oh it's just a data thing like you can either choose to look at it and benefit from the data and invest in women only founder teams and make more money or you can ignore it and complain about it and
61. 6:25Speaker 3: i'm comfortable with that too.
62. 6:32Speaker 4: If women and men participated equally as entrepreneurs the global gdp could rise by five trillion there's that number Gross
63. 6:42Speaker 4: domestic product is an indicator of economic health. In other words, investing in women will make our global economy much stronger.
64. 6:53Speaker 4: We cannot afford to continue ignoring or underestimating women founders.
65. 6:58Speaker 4: We have so much to gain by empowering more women to build and lead great companies.
66. 7:05Speaker 1: Where do you see the biggest remaining barriers, you know, getting that first meeting with investors maybe for women-only teams or winning that early stage investment or securing those larger rounds needed to scale?
67. 7:17Speaker 2: Yeah, that's a really good question.
68. 7:18Speaker 3: There's obviously barriers at each one of those places, but we also know that our data has shown us that when women get to next stage, so like Series A,
69. 7:29Speaker 3: which is usually when they're generating like really good north of sort of $ 2 or $ 3 million of revenue, that
70. 7:38Speaker 3: if a woman-only founder team has been invested in by women investors early.
71. 7:43Speaker 2: They are... twice as.
72. 7:45Speaker 3: Likely to get no investment at the Series A, which is also crazy because they need the capital to scale.
73. 7:52Speaker 2: So there's barriers at each stage.
74. 7:55Speaker 3: But I think that it's really easy to look at things like, oh, how do women get in the door for the early stage of funding? I'm like, I'm not
75. 8:06Speaker 3: sure if that's the problem. If you're a woman-only family team and Even if you're not consciously looking at it, you can see in the press, in all the newspapers everywhere,
76. 8:15Speaker 3: that male-only founder teams, you've always got like three white dudes in a WeWork office in a hoodie celebrating like $ 2 million seed round. And so your unconscious says to you, oh, that space isn't for me.
77. 8:26Speaker 2: I won't even apply there. How do we change that?
78. 8:29Speaker 3: Sharing a lot of stories of the women that you do invest in. So WNT Ventures, which is a deep tech fund in Tauranga, they have got in their fund three, I think it is, their portfolio, they've got about 60%
79. 8:40Speaker 3: of their startups have women on their fund team, either mixed gender or solo women founder.
80. 8:45Speaker 2: But if you go on.
81. 8:46Speaker 3: Their website, the first picture that pops up is of a woman. in a deep tech fund. So that just tells women or anyone who's looking on their website against the funding, oh, I'm welcome here.
82. 8:56Speaker 2: And then guess what? They don't even have a gender mandate.
83. 9:00Speaker 2: They have just, because they're.
84. 9:01Speaker 3: Investing in more women and then because they talk about it, they're attracting more of the same people. That's just kind of how it rolls. So they are extremely successful fund.
85. 9:11Speaker 3: I know that their investors are very happy.
86. 9:12Speaker 1: What would you like investors to take away from this data and this research that most they may not even currently recognize about their own decision-making.
87. 9:22Speaker 3: I think it's worth remembering that inside all of us is a huge amount of bias. And we might not like to admit it, but it drives a lot of
88. 9:31Speaker 3: our decision-making. So when you have newspapers full of teams of three dudes saying, like raising $ 2 million seed rounds,
89. 9:41Speaker 3: it unconsciously tells us all that that's who runs successful businesses.
90. 9:45Speaker 3: We don't actually break it apart and say, well, hang on, if that's all we're funding.
91. 9:49Speaker 2: Then that's the only people that are ever going to be successful.
92. 9:51Speaker 3: We're actually measuring a really tiny data set that doesn't take into account all the other people out there. I think that a good investor or someone who genuinely wants
93. 10:01Speaker 3: to invest in companies that are going to have a fantastic return needs to direct a lot of their attention internally in their business towards attracting women.
94. 10:12Speaker 2: And I think when you get.
95. 10:13Speaker 3: Articles from Like the senior partners at Blackbird, two male partners last year did an article saying, oh, we've worked really hard to attract women and we just can't invest in them.
96. 10:24Speaker 2: Like, it's so myopic to think.
97. 10:27Speaker 3: That by having two men talking about that and also just hosting a lot of dinners where you get women to come talk about it is not the same as actually investing in women and then sharing the stories of that.
98. 10:38Speaker 2: That is the most obvious thing. Yeah, it's... I think.
99. 10:41Speaker 3: Funds can choose whichever way they go, but there's just massive opportunity there, huge opportunity to invest in women-led businesses.
100. 10:49Speaker 1: Yeah, and it's just that uncomfortable conversation, isn't it? Because people don't like to think that they have an unconscious bias about something, but it's just, you know, it's been
101. 10:58Speaker 1: ingrained because society has told us that over decades and decades and decades. And, you know, people do tend to
102. 11:07Speaker 1: immediately get defensive when they say, no, well, you know...
103. 11:11Speaker 1: But here we are. Here we have the research. Here we have the data proving that it's actually happening.
104. 11:17Speaker 3: We are all driven by unconscious bias. That's why it's unconscious.
105. 11:21Speaker 3: We've got no idea. You know, I am really knowledgeable about this area of how bias works in our funding.
106. 11:28Speaker 3: And I still am subject to the same biases as you are, as everybody else is, as all of the VC firms are. I think it's impossible to unwind it, which is why the true answer is, is to share
107. 11:41Speaker 3: massive stories of success of everybody, like whether you're man, woman, Maori, Pacifica, every single disabled, all the other kind of other small
108. 11:50Speaker 3: groups that are largely overlooked, and share them so that we get investment that represents the demographic of our country.
109. 11:57Speaker 3: Not because it's fair, we're not in a playground, but because it's a good idea, because then we're going to build products that make us all healthy. It's very difficult to And last year I went to, I was in Harvard Business School in the Harvard School of Engineering.
110. 12:09Speaker 2: I was at ClioCon.
111. 12:10Speaker 3: I won, Dispute Buddy won a prize from Airwallex, the Global Growth Grant. And I was invited to Harvard Business School One of my friends is a lecturer there, Kelly Kimball,
112. 12:21Speaker 3: and I was invited to go and look at this machine that does some inflating in your arm and lifts it for people with upper arm mobility issues. And I
113. 12:31Speaker 3: have a paralyzed right arm. So I'd seen it in the press and I went over there. They invited me to come and look at it. And I walked through
114. 12:39Speaker 3: and I was immediately struck by the enormous amount of investment that had gone into these young people to solve the biggest problems in the world, all of whom largely didn't experience the biggest problems in the world. They were
115. 12:51Speaker 3: all largely really wealthy, white and really privileged and probably had never experienced the problems that, say, indigenous women in
116. 12:59Speaker 3: Chile face about climate change. And so the only people that are going to solve those problems are the people that actually experience them.
117. 13:07Speaker 2: That's who we should be funding them.
118. 13:09Speaker 1: Thanks for joining us, Jenny.
119. 13:11Speaker 2: Thank you so much. Thank you for having me.
120. 13:15Speaker 1: That's it for this episode of The Front Page. You can read more about today's stories and extensive news coverage
121. 13:22Speaker 1: at nzherald.co.nz. The Front Page is hosted and produced by me, Chelsea Daniels. Kane Dickey is our studio operator, Richard Martin,
122. 13:33Speaker 1: our producer and editor, and our executive producer is Jane Yee.
123. 13:37Speaker 1: Follow The Front Page on the iHeart app or wherever you get your podcasts and join us next time for another look beyond the headlines.