A report published by Deloitte highlights the Fintech industry and the disparity in gender when it comes to founders.
As many people know, traditional finance has historically been dominated by the old boy network. Innovative financial services firms have experienced greater participation from women executives but it still falls short when it comes to gender equity.
The report, entitled “Achieving gender equity in the Fintech community,” reveals that Fintechs with women founders or cofounders now comprise 12.2% of the total startups in comparison to 10.9% a decade ago. Startups with all-women founding teams accounted for 3.1% of the pool in 2019, a minor improvement from 2.4% in 2010. In 2019, women-founded/co-founded Fintechs rose 8X to 369 but men founded startups jumped by 7X totalling 2648.
In contrast to Fintechs, the overall startup community has seen a consistent increase in funding since 2014. To quote Deloitte:
“… during the last five years, funding for women-founded startups grew at a compound annual growth rate of 58.9%, while funding for men-founded grew by 29.1%. In fact, 2019 broke all records: Startups founded and cofounded by women garnered a total of US$5.1 billion in funding—almost 60% of the total capital raised by these categories since 2009. Of that total, US$540 million was invested in startups founded only by women, up from just US$85 million in 2015. However, it should be noted that Starling Bank and Tala accounted for 60% of the total investment in Fintechs with women-only founding teams in 2019. Similarly, the cofounded startups Kabbage and Lendable raised a combined US$2 billion during the year.”
When it comes to the average investment made in a Fintech, women founded Fintechs raise $8 million compared to co-founded startups at $15.1 million and male founded startups at $15.6 million. So why is that?
Deloitte cites a 2014 report by the Harvard Business Review indicating VCs have a bias in the funding process leaning more towards men.
And what about startup funding during the time of COVID? The report says women are not doing that well.
“Women-founded and cofounded startups appear not to be faring well during the pandemic. In the first six months of 2020, they raised a total of US$875 million in funding across 20 startups compared with US$3.5 billion seen in the first half of 2019 across 56 startups. Meanwhile, 243 men-founded startups raised around US$12 billion in the first half of 2020, compared with US$17 billion raised over the same period in 2019 across 473 startups.”
Deloitte issues a “call to action” to address the gender disparity with a task list for investors, women founders, and financial institutions.
Overall for startups, there are some encouraging numbers when it comes to gender equity but when it comes to Fintechs the sector can do better.