Action needed as venture capitalists reluctant to invest in fintechs founded by women

Positive discrimination

You might not expect a very successful women to call for positive discrimination in favour of female-founded fintechs, but that is exactly what has been suggested by Sylvia Carrasco, CEO at London-based trading fintech platform Goldex Technologies.

Goldex, a platform for people trading in gold, is Carrasco’s current venture, but she has held senior posts in the London trading sector, with a focus on electronic trading, since the late 1990s. She lived through the “big bang” when trading moved from paper and telephone-based deal making to computerised trading, so she knows all about transforming a sector.

“Women in fintech all know how hard it is to raise money,” said Carrasco.

She acknowledged the fact that the main issue in fintech is that very few women set up fintech companies. This, she said, is due to a lack of women in senior roles in the City, which is a prerequisite for setting up a fintech.

The male domination of the VC community is another challenge, said Carrasco. “Why is the VC community not giving money to fintechs set up by women? A lot is because the VC industry is run by men and is one of the few places that is still a men’s club,” she added.

Drastic action is required if VCs are to increase investment in female-founded fintechs, said Carrasco. “Because the proportion is so low, you have to force it, a little like by law. If I was in charge of a VC fund, I would be enforcing positive discrimination as it is the only way we can increase the investment,” she said.

“Once you get up to 20% or so, you could argue that you have to put other mechanisms in place.”

Unconscious bias

Even if positive discrimination is a difficult concept to accept for an industry of high-flyers, the current unconscious bias towards men should at least be addressed.

A female CEO in UK fintech, who wished to remain anonymous, said it is hard to imagine in this day and age, but when VCs quiz fintechs seeking investment, they ask female founders different questions to those they ask male founders.

This unconscious bias leads to warped decisions, said the CEO. “These decisions are based on these biases, such as male founders being asked questions focused on growth and size of opportunity and female founders asked risk and prevention-oriented questions,” she said.

But if VCs overcome their bias towards fintechs set up by men, they will expect more female fintech leaders to come forward.

Diversity problems

The shortage is not helped by a lack of investment, but is mainly the result of the traditional industries that created fintech. Maria Scott, founder and CEO of Taina Technology, which helps financial services companies meet their tax regulatory requirements through automation technology, said the tech part of fintech is also partly to blame for the lack of female leaders.

Fintech combines two traditional sectors – technology and finance – which both have their own diversity problems, said Scott. “Both of these have been suffering from the shortage of women leaders,” she said. “There are some exceptional pockets, but across the board it is true for both sectors.”

Scott said the root causes for the two sectors are different, with technology seen as more of a traditional domain for boys, with few girls choosing it as an area to study, and the finance sector traditionally seen as being hard to combine with family responsibilities. Both these industries are slowly overcoming these obstacles, she said.

“Overall,though, why do we generally have fewer female leaders in fast-moving businesses?” said Scott. “Fundamentally, I believe it is because it is genuinely very hard to combine leading a fast -growing business with the responsibilities of a mum and a wife. We as women tend to be very hard on ourselves and anything less than perfect does not tend to be good enough.

“In an ideal world, we would all be seen as equally responsible for our families, so women would be equally likely to step up to leadership as men are. This mindset change will just take time and take a lot more role models.”