Women still battle for start-up finance

This is an audio transcript of the FT News Briefing podcast episode: Women still battle for start-up finance

Marc Filippino
Good morning from the Financial Times. Today is Thursday, October 14th, and this is your FT News Briefing.

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The UK’s “levelling up” plan could come with a high cost for the country’s pensioners. We’ll look at start-ups in Latin America, which has now become a hot place for investors. And FT business columnist Helen Thomas has been looking into women-led start-ups and why they’re still having a hard time getting funding.

Helen Thomas
This isn’t a problem that 24-year-olds with no experience are running into. This is a problem that women with serious business careers and serious kind of managerial experience are running into.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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UK prime minister Boris Johnson promised in his last election campaign to spread economic prosperity by investing in poorer parts of the country. Now, we have details on how his government will fund that. The FT reports that chancellor Rishi Sunak is looking to tap into billions of pounds of pension fund cash to invest in long-term projects like infrastructure and clean energy. Officials are working on proposals to dilute the ceiling on annual management fees, rules that now protect tens of millions of UK retirement savers from high charges. Critics are concerned that retirees could be exposed to high or even more volatile fees. The UK government declined to comment for this story.

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Latin America is plagued by inefficiency and bureaucracy, which means if you’re an entrepreneur, there’s plenty of opportunity for disruptive solutions. And entrepreneurs are doing just that. This year, they’ve pulled in billions of dollars in venture capital. To find out more, I’m joined by the FT’s Latin America editor, Michael Scott. Hey, Michael.

Michael Stott
Hello, Marc.

Marc Filippino
So, Michael, how much investment has gone into tech start-ups in Latin America?

Michael Stott
Well, last year, $4bn, just over $4bn of venture capital flowed into the region, Marc, which was actually more than south-east Asia. In the first half of this year, things really took off, and Latin America pulled in $6.5bn in venture capital, which is almost as much as India.

Marc Filippino
Wow. So what kind of places are we talking about here? Can you with some of the specifics?

Michael Stott
Yeah. So the main focus of the big countries — Brazil, Mexico, to some extent, Colombia and Argentina. And what we’re seeing is money coming into more innovative Latin American tech companies, which are trying to tackle some of those problems you talked about, Marc, the bureaucracy, the difficulties of doing business, difficulties of daily life in Latin America

Marc Filippino
And for investors, from their perspective, why pivot away from south-east Asia and toward Latin America instead?

Michael Stott
Well, partly because Latin America had lagged behind, Marc. So the region had been quite slow to take off in tech terms. And so the opportunities are much bigger. And what happened in the pandemic was the pandemic hit Latin America extremely hard, harder than almost any other region in the world. But what it also did was it pushed people online much faster than had been the case before. So, for example, the fintechs, the new banks that were being set up, they found that they grew exponentially. This is a region with a large number of poor people who don’t have a bank account, and those new fintech banks targeted them and they found they could acquire customers incredibly fast. And the best example of that is probably Nubank, which is a Brazilian bank that was started in 2013, and it now has more customers than any other standalone digital bank in the world — 40m customers.

Marc Filippino
Are there other examples that come to mind for you that aren’t bank-related?

Michael Stott
Yeah. So there’s a used car venture in Mexico, Kazak (sic), which is a very interesting one trying to solve the problem that in Mexico people are concerned about are they gonna buy a stolen car? Are they buying a car with dodgy papers? Are they gonna go and buy a car somewhere where they’re going to get mugged? So Kazak (sic) is trying to simplify all that by buying the car for you, checking all the paperwork, offering a guarantee, delivering it to your home, valeted, ready. So that’s one example. Another one is Rappi, which is a Colombian delivery company, that’s now trying to become a sort of type of superapp, delivering everything from cash to fresh groceries. And they’ve got a thing called Rappi Turbo-Fresh that means that if the 200 most sold items you can request and they arrive within 10 minutes.

Marc Filippino
Michael Stott is the FT’s Latin America editor. Thanks as always, Michael.

Michael Stott
Thank you, Marc.

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Marc Filippino
And speaking of start-ups, let me tell you a story about an entrepreneur who wanted financing for a better designed breast pump. It’s a pretty short story because her idea was dismissed as too niche.

Helen Thomas
It’s actually incredibly hard to understand why the old generation or the standard generation of breast pumps are pretty hopeless unless you’ve had to use one. So I would not have had a good appreciation of that before I had children.

Marc Filippino
That’s the FT’s business columnist, Helen Thomas. She says the problem is that the vast majority of people making decisions about what ideas the fund have never had to breastfeed. One study shows that in the UK, about 13 per cent of investment professionals are women, and in the US it’s about 12.

Helen Thomas
I think in some ways it’s even sort of worse than that because the women that are in these sectors, you know, can be quite concentrated in certain firms. So certainly in the UK say more than 80 per cent of firms had no women on their investment committees at all.

Marc Filippino
So Helen, did the pandemic have any effect on the number of women entrepreneurs able to get funding for their business ideas?

Helen Thomas
Well, it was, it dropped is the short answer. The data suggests that female-founded share of funding in 2020 dropped towards 2 per cent. I think the figures in the UK actually, you know, bounce along around 1 per cent, so it’s even lower. And it’s worth noting actually that the government in the UK had this funding scheme that put money into start-ups and high-growth companies to try and avoid a sort of generation of companies failing. Only about 1 per cent of that went to female-founded businesses as well. So it dropped from a low base to even lower. And I think, you know, that reflected some of the gendered effects of the pandemic. And the theory is that because children are off school, because people working from home, because there were obligations and demands on women, potential female entrepreneurs, female pitchers, you know, didn’t get off the ground. So there may be a sort of gendered effect of the pandemic there.

Marc Filippino
OK, so pandemic aside, or maybe now that the pandemic has made this more urgent, what ideas are there to get more women-led start-ups funded?

Helen Thomas
I think longer term, you get more women in the venture capital industry full stop. I think in the short term, there’s an appreciation from people like Debbie Wosskow, who I spoke to, who founded an all-female club and entrepreneurship platform and fund, that the industry is starting to develop platforms and mechanisms and support to specifically encourage female entrepreneurship. I also spoke to January Ventures, which is another interesting outfit, they have basically decided that, you know, venture capital is a network business. It’s very much sort of based around who you know. And they see that as a very entrenched business that’s only going to change very, very slowly. And so January Ventures, they’re really trying to rethink how you pitch. They’re trying to make it much less dependent on introductions and pitch decks, you know, much more equality of access to the process. And they’re actually looking at diversity far more broadly because everything we’re talking about around gender diversity also applies to other types of diversity. A January Venture stat is that their research says that for every $1 men raise at the early stage, women raise an average of 37 cents and black women raise an average of two cents.

Marc Filippino
That’s the FT’s business columnist, Helen Thomas.

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Before we go, inflation is hitting one of China’s most basic cooking ingredients. The country’s biggest soy sauce maker, Foshan Haitian, says its retail prices will go up 7 per cent. And it’s doing this to make the business more sustainable. Raw material costs are rising. Chinese coal prices are at a record high, and the autumn harvest season for crops like soy has been disrupted by power outages. More price increases are expected, and companies may have to absorb the higher costs instead of passing them on to the consumer. That’s because Beijing historically caps prices when they get too high.

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You can read more on all of these stories at FT.com This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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