THE VC FUNDING GAP IS WIDENING
Why is investment in diverse / female founded companies so persistently low? And what can be done about it?
Christina Caljé sat with Female Invest to discuss the VC funding gap for diverse founders, and potential solutions. Female Invest is on a mission to close the financial gender gap.
Selection from the article:
“We are seeing a strong trend where angel investors are stepping in to plug the funding gap at the early stages” —Christina Caljé
A former Executive Director at Goldman Sachs, Christina Caljé, became a serial entrepreneur successfully launching and scaling several businesses including Autheos, a video-marketing platform, which was acquired in 2021.
With the vast knowledge she acquired in raising capital and breaking into different markets, Caljé has now taken on the VC world serving as an advisor, mentor, and angel investor for pre-seed startups, with a particular focus on investing in women founders and founders of colour. She shared some important insights into the current market that founders should take note of:
VC networks close women off
Venture capital is also famously an insiders game. These networks are by default less inclusive of women, which means they’re likely to have fewer connections to investors. This lack of diversity on the investor side has a substantial negative impact for fundraising founders.
“VCs typically leverage their own network to source founder introductions, and their networks typically reflect their own profiles, founders of color are disproportionately affected.’ says Christina Calje, a former Goldman Sachs investment banker-turned-founder and angel investor.
‘Women aren’t the only ones affected by this closed network. In fact, it’s female founders of colour who are the worst off. Historical underfunding of diverse founders creates a perceived higher risk profile of these founders,” says Calje. Many of these diverse founders are bootstrapping their growth – using their own money to fund the early stages of their startup. The personal connection factor comes back into play here: “Without a proper support network of investors to help advise and fund their plans, this stunts the growth of the business, and therefore exacerbates the headwinds of future fundraising rounds,” explains Calje.
VCs are tightening their belts
“The ‘market correction’ in the VC fundraising market has impacted all founder profiles, though disproportionately affected black, brown, female founders as investors revert to their norms in terms of deal sourcing and perceived risk,” she says. This is backed by research and “according to Atomico’s latest State of European Tech report, 87% of VC funding in Europe is raised by men-only founding teams. Funding raised by women-only teams has dropped from 3% to 1% over the last four years,” she says.
Embracing diversity at the VC level
Investors are taking action on an individual level too, and Christina Calje builds her personal network with diversity front of mind. “I actively connect with other investors that have a strong track record of funding companies that have diverse founders,” she says. “These networks amplify my access to quality deal flow, provide me with extra perspective, and increase the capital access that I bring to founders as they raise their current round and follow-on rounds.”
Final thoughts on the VC funding gap
The current statistics around VC funding may paint a bleak picture, but the experts I spoke to offer a hopeful vision for a future where VC funding gap is narrowed once and for all. Bold initiatives are surfacing across the landscape which seek to encourage young girls into entrepreneurship, increase diversity at VC level, and initiatives that offer women access to mentorship, resources and connections. The tide may be shifting slowly, but here’s to hoping we see a snowball effect in the years to come.
