Female entrepreneurs continue to make strides globally. So far this year, at least a dozen new female-founded unicorn ventures valued at $1 billion or more- have emerged. The latest, Incredible Health, was co-founded by Dr Iman Abuzeid  CEO of the health tech start-up.

She follows in the stead of Eynat Guez who heads Papaya Global, an HR platform;  Market Kurl, a fast-growing online grocer in South Korea founded by Sophie Kim; Jessica Alba’s The Honest Company;  Cristina Junqueira, co-founder of  Brazil’s nubank, and Falguni Nayar’s beauty brand Nykaa in India.  Female founders outperform, exiting quicker and at a higher valuation, according to Pitchbook’s “All in Female Founder in the US VC Ecosystem”.

Yet behind this seemingly glowing picture lies a bleaker reality: whilst VC funding has seen a surge in recent years, in the US for example, female founders raised a dismal 2,3% of total venture funding and in the UK a paltry 1.1% in Europe according to a Pitch Book report. Not only do female-founded businesses receive less funding in total, but even more worrying, they secured on average less than half the amount received by their male peers ($935,000 compared with $ 2.1million). This is despite the fact that for every dollar of funding female founders generated twice as much as male-founded firms (BCG).

With venture capital and its accompanying support vital to power high-growth start-ups, it is perhaps no surprise that female-founded businesses end up being smaller than those of their male counterparts. Tackling this gender VC funding gap is recognised as essential not only to the growth of female-founded businesses but also to redress the gender wealth gap and to create more employment opportunities for women, as female-led firms are known to hire 25% more women.

But here is a bright spot on the horizon- the rise of the female investor. Helping to bridge this funding gap is a new group of angel investors, and venture capitalists- particularly General Partners (GPs) and female-led gender-lens funds. This trend which began in the last decade has accelerated in recent years.  One of the first and probably the most well-known is the Female Founders Fund (FFF), founded in 2014 by Anne Duggal, which has focused on funding tech-related start-ups. The influence of FFF on the funding ecosystem for women has been phenomenal by shedding light on the investable opportunities that female founders represent.  In Europe, Voulez Capital founded by Anya Navidski, was the first VC fund for women lead ventures.

On an equally positive note is the increasing number of female GPs which has risen to 15.4% of the total in 2021, up from 12% in 2019. This is important as studies show that female founders’ chances of securing investment rise when there are women investors present during a pitch.   The women-investing-in-women trend has benefitted in recent times from public figures entering into the gender lens funding arena. Notable examples are Melinda Gates through her Pivotal Ventures, which aims to close the funding gap for female founders, and Serena Williams who recently announced she would shortly retire from tennis and dedicate more time to her Serena Ventures which raised $111million in  March to invest in minority and female-led ventures.  One highly influential US female investor is Ann Griffin of G9 Ventures which she set up in 2017 who is searching for finance for the next women-led venture with unicorn potential- she has invested in Goop, Bumble, and Spanx and has a reputation for also leveraging her high-powered connections to help entrepreneurs find investors and mentorship.

Women are also creating an impact in the angel investor space, traditionally the remit of men. With women now controlling 32% of the world’s wealth, we have seen an increased interest in becoming investors. Amanda Robson, principal at Cowboy ventures- all of whose investments as of August 2022 this year have been to female founders- has set out to grow a network for female and non-binary investors helping to educate and starting at smaller check sizes as low as $5,000 where normally this could be as high as $150,000. Other innovative female-run funding models include The Billion Dollar Fund for Women, and following its success Beyond the Billion, both co-founded by Shelly Porges and Sarah Chen, as well as Vicki Saunders’  SheO, a global initiative to transform funding for female entrepreneurs.

Other notable developments are in the impact space, public sector and international development finance institutions reflecting the recognition of the inclusive role female entrepreneurship can bring in terms of social impact and development.  Notable global initiatives include the We-Fi, the Women Entrepreneurs Finance Initiative, a global partnership hosted by the World Bank Group mobilising financing and non-financial support for women-led/owned businesses in developing countries which has so far allocated close to US$250 million to tackle challenges women entrepreneurs face in developing countries.

Project Sage 4.0, by Wharton’s Social Impact Initiative, co-authored by Suzanne Biegel, co-founder of Gender Smart, catalogues over 200 funds globally that invest or finance ventures globally using a gender lens. As of June 30^th last year, the funds in the study had raised $6bn in both debt and equity with venture capital providing over 60% of the total funds. Though not exhaustive, this directory in its fourth iteration provides a valuable resource to female founders and a measure of the growth of these funds.

Female investors and female-led funds are leading the way in providing capital to women founders.  Their success will go beyond the amount of investment they make to changing the culture and catalyzing mainstream capital providers towards gender-balanced investment. In recent years we have begun to see some of the most conservative capital providers in the investment banking sector specifically target female entrepreneurship. For example, Goldman Sachs’ 10,000 women, in partnership with IFC provides female entrepreneurs around the world with financial as well as business management resources. In the wake of the racial justice movement in the US in 2021, it sparked its 1,000,000 Black Women programme which includes funding for female-led businesses.

On the whole, progress is being made with female investors leading the way but a lot more concerted action is needed to achieve gender balance in funding entrepreneurship.

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Founder and Managing Director of Avandis Consulting, Dr Anino Emuwa talks through why fintech is the darling of investors.

Rebound in Investments

Global investing in fintech rebounded this year recording $30.8bn in Q2, the largest funding quarter ever (CB insights). This follows a drop of more than 30% in 2020 – from $168 billion in 2019 to $105 billion in 2020 —according to KPMG Global Insights— as the economic uncertainty brought about by the pandemic dampened investor appetite. This supercharged investment activity in fintech innovation this year follows on from the acceleration in digital transformation and the accompanying increased demand for digital financial services during lockdown.  Whilst overall global retail volumes fell an estimated 5.7 % (Statista), as firms and consumers moved online, e-commerce’s share of retail increased to 19% from 16% last year totalling of $26.7 trillion, powering a surge in payments.

Open banking and innovation

Innovation in the sector has accelerated with open banking regulations facilitating access to banking and valuable financial data through APIs. Fintech companies are truly disrupting financial services delivering creative solutions across the spectrum of digital and mobile products with payments, mobile banking and personal financial services amongst the most buoyant sub sectors.  Going digital means users are also able to enjoy a superior UX experience which is becoming a point of differentiation of these new applications, and there is no going back.

Unicorns and mega rounds dominate

The fintech sector today boasts 198 unicorns globally and is valued at $1.91 trillion (as of July 7^th -fintechlabs) adding 12 in the month of June alone.  In the latest news (Monday 18^th July)  Robinhood prepares for its IPO which could value the fintech at up to $35 billion.

The fintech landscape is complex and difficult to neatly categorise as it rapidly changes in order to reflect new technologies. Nevertheless, CB insights identifies 8 main sectors: payments, neo banks, digital lending, wealth management, insurtech, capital markets, solutions for smaller and medium size businesses (SMB) and real estate. To that could be added regtech. Whilst the sector has seen significant investment growth across most of its verticals, payments, digital banks, wealth management and SMB – particularly in loans- are seeing some of the biggest growth.

Interestingly, much of the recent investment in fintech can be attributed to mega funding rounds. Top 10 in H1 2021 were: Robinhood, ($3.4 bn) in two rounds;  Klarna ($41bn); Mollie – Dutch payment start up- $800 million; Nu Bank( $750m) Brazilian digital bank; 4 paradigm- AI- Klarna ($ 600m ); WeFox ($650m); Wealth Simple ($610 m); Stripe ($600 million); Checkout.com ($450m)  (source thefinancialbrand)

Centres of Activity

London retains its pre-eminence in the fintech sector attracting over a third of European VC funding (growthbusiness.co.uk) in the first half of this year which comes as a relief in the wake of Brexit. The UK is second only to San Francisco and ahead of New York this year. The city hosts more fintechs than any other globally, around 3,000 with 29 fintech unicorns, with SF ahead with 37.

Investment activity in Europe marks change from previous dominance by the US and China. Latin America and Asia are also seeing growing activity with the Middle East and Africa (MEA) not been left out with the top countries for investment being Israel in leading position, followed by the UAE. In Africa, Nigeria leads with South Africa, Kenya and Egypt as other major hubs on the continent. Given Africa’s mobile first population, unsurprisingly VC investment on the continent has been dominated by fintech (techcrunch). Contrary to advanced countries’ VC funding has been mainly to start ups with examples such as Nigeria’s  digital Kuda bank raising $10 million last year and payment infrastructure firms such as Paystack, Flutterwave and Okra.  Other notable deals include Stripes $200m acquisition of Paystack in 2020. The continents unicorns now include Nigeria’s Flutterwave and Interswitch as well as Egypt’s e-payment platform Fawry.

Future Growth: sectors and trends

Alongside expected high growth in payments and digital banking, interesting developments to watch for include emerging technologies which will enrich the infrastructural architecture and provide exciting new opportunities such as blockchain, DeFi and digital currencies. Cryptocurrencies are showing signs of becoming mainstream with investment banks like JP Morgan, Morgan Stanley offering digital assets linked to crypto currencies as the eye watering valuation of cryptocurrency companies can no longer be ignored.  Artificial intelligence and machine learning will be increasingly deployed to efficiently sift through large amounts of data being collected and big data and data analytics will allow fintech to differentiate themselves in the future. Internet of Things (IoT) and Cloud are also expected to be areas on growth.

With the proliferation of data and valuable digital financial information, cybersecurity is now a necessity and will become an increasingly important area to protect financial institutions and customers.

Other trends to watch out for are the incursion of Big Tech in this space which has long since been eyeing the payment space and now exploring products including crypto contactless checkout, mobile banking and international transfers to name a few. Facebook, Apple, Google and Amazon exploring fintech innovation in further afield markets such as India, Brazil and Singapore with products including crypto contactless checkout, mobile banking and international transfers to name a few.

As traditional banks wake up to the threat of disruption by fintech, we expect to see more collaborations with fintech leveraging synergies. – Fintech face high customer acquisition costs meanwhile banks have the established client base and they can benefit from the technological innovation and client experience from fintech providing customer with seamless digital experience.

An often overlooked opportunity which could spur a trend are sectors un(der) served by traditional banking services. Products and services targeted to financial inclusion and financial services for women could reap big rewards.

Fintech investments have accounted for over 20% of V investment this year, says the Economist and many feel that this is just the beginning.  With the fintech valued now at $ 1.1 trillion, and a slew of ipos this year,  a record of over 60 as of July 6^th  compared to the previous high of around 25 in 2015  (Pitchbook)- fintechs are fast becoming become part of the establishment.

Dr Anino Emuwa is Founder and Managing Director of Avandis Consulting, a strategy and financial advisory firm in France.  A former corporate banker with Citibank, she is a also a non-executive director, sitting on several boards including the Board of Governors of Nottingham Trent University. Anino is a and Diversity and Inclusion advocate; she is a member of the Institute of Directors’ Expert Advisory Group on Diversity and Inclusion and a member of the global advisory Board of UK’s 20-first, a gender balance consultancy firm.

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