UK’s Coronavirus Startup Rescue Package Disfavors Women-led Startup

 
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This Merian Perspective includes a synopsis of a pair of related articles which were recently published in The Sunday Times and perspective commentary from Merian Ventures. Links to the original articles, which require a subscription, are provided at the end of this blog as well as links to related articles for further exploration.

Original Articles

Coronavirus Future Fund ‘is a setback for diversity’ and City Women Round on Rishi Sunak over Coronavirus Tech Fund

By Peter Evans

Published April 26, 2020 in The Sunday Times

Story Synopsis

Amidst the ongoing debate in the UK on whether taxpayers should fund investments in startups or whether events such as COVID-19 should be a mechanism to clear out poor performing and low potential startups, incubators and VCs, the UK government announced a £1.25bn ($1.55bn) rescue package for startups.

This new package, with the intention to support young pioneering companies with promise, includes two funds:  a £500m ($620m) loan fund called the Future Fund that is matched by private investors and an additional £750m ($930m) for the R&D agency, Innovate UK fund. The package, which was devised by 13 influential tech investors – all men – was blasted by more than 50 of the City’s highest-profile women investors and entrepreneurs, as it favors startups that already have VC backing or an existing Innovate UK relationship – typically those launched by men or mixed founding teams in London or the Southeast.

The investment guidelines have already raised concerns that funds can be allocated to unremarkable companies and that it’s harder for underfunded entrepreneurs including women, ethnic minorities outside of London or the Southeast, to gain support.

The coronavirus business interruption loan scheme is starting to ramp up, but many smaller applicants have not been approved for loans.

The Merian Perspective by Priya Guha

Merian Ventures, a US-UK venture firm investing in tech sector companies that are founded, co-founded or majority-owned by women innovators, shares the concerns in the article that this pattern of underfunding women founders is consistent, starting with valuation and initial capital and continuing with the allocation of equity and follow-on funding. Female founders have limited financial power unless they are funded fully and fairly from the beginning.

In 2019 women made up 13% of the founders and just 9% of investors. According to the NVCA Venture Monitor Report by PitchBook, in that year the median VC pre-money valuation in the US was $12m for companies led by female-founders versus $15.2m for their male-led counterparts.  Female-led startups represented just 6.7% of the total US VC deals. In the UK, the investment in women-lead startups is even more dire. A 2019 British Business Bank Report stated that just 1% of VC funding went to start-ups founded solely by women.

Merian Ventures' mission is to overcome this unintentional familiarity bias. Whether through direct investments or rescue funds, we create opportunities for investors willing to back female-founded innovation and enabling them to realize the untapped economic potential of female founders and co-founders.

To learn more about Merian Ventures and the women entrepreneurs we fund, visit www.merianventures.com or follow us on LinkedIn and Twitter.

Priya Guha is a UK-based Venture Partner at Merian Ventures and a Council Member of Innovate UK.

Merian Ventures is a venture firm founded by Alexsis de Raadt St. James that invests in women-founded and co-founded tech innovation in the US and UK.




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