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We need to level the investment playing field for diverse founders – could tech & AI hold the answer?

We need to level the investment playing field for diverse founders – could tech & AI hold the answer?

Brianna Bao, Investor, and AI start-up Co-Founder, shares her thoughts on how we can improve access to investment for diverse founders as part of our Investment Futures blog series.

My interest in supporting diverse founders goes back to my days as a Math for America Fellow in New York. During my fellowship, we went into underprivileged communities to teach kids STEM, including computer science. It was incredibly rewarding. Many of them were girls, and I felt that we really made a difference. I saw first-hand that girls from all backgrounds can achieve their dreams with the right support and inspiration.

This gender bias was further reinforced while doing my MBA programme. We were put into a start-up simulation environment. Through this process, I talked to many university professors and people from the start-up and investment ecosystem. I was typically asked if I had a track record or had done it before. Was I technical? As a solo founder, I was strongly advised to bring on board a male co-founder.

This set my career on a path to try and make a difference for diverse founders and to level the investment playing field. My vision and philosophy are to support anyone from underrepresented backgrounds into the venture capital ecosystem, not only founders but also VCs. Many VCs come from a traditional banking and finance background, which can be a barrier because they’ve never been in the ecosystem before.

Currently, all female-founded teams receive only 9% of equity deals (which is an increase from 5% in 2011). This equates to 13% of all first-time equity deals for all female-founded teams and 10% for all ethnic minority-led teams.

 

Getting tailored advice is a game-changer

Underrepresented founders are not getting enough support from day one when it comes to getting themselves investment-ready. They’re passionate, but they may not have access to the right people who can give them the advice that they need to make sure they present to investors in the right way, for example, how to put their pitch deck together and how to speak to investors.

Having access to tailored advice is a game-changer. Most of the time, you can find resources online, but they are very general. Everyone comes from different backgrounds and sectors. So, cookie-cutter advice doesn’t work. One thing I wish I could do more of is help founders understand that there’s a lot more preparation that they need to do at the beginning.

 

Don’t be afraid to look beyond the UK for investment

In the US, there are many more funding sources than in the UK, for example, foundations, endowments, and pension funds that invest in emerging fund managers who are more likely to support underrepresented founders. Europe’s Horizon funding has also been great. It’s provided a lot of funding for start-ups, but the cycle is very long. For founders with a runway of less than 6 months, that’s not going to work.

The landscape is changing in the UK. The Government is initiating a £250m fund from pension pots, which larger players from the ecosystem will invest into funds here. It’s a great first step, but I think Government policy needs to change because there needs to be more funding put into emerging fund managers particularly. Supporting the emerging funds is crucial, especially from the Government’s side, because it is just so hard for them to raise. I experienced this first-hand at Simsan Ventures. You go to a Lead Partner, and they ask for a track record, but you don’t have that as an emerging fund.

Angels can be a great source of investment for start-ups in the UK, but in the current market, it’s really hard as they are also asking for a lot more traction.

So, I would urge underrepresented founders to go to the US and Asia, especially if you’re looking to expand into those global areas. Asia has potential. I recently helped a couple of start-ups get investment from there. It’s interesting to see because I think a lot of founders are very sceptical about whether they can get investment from a foreign investor – well, the answer is yes, you can. You just have to do your research and, if possible, get support to get some introductions.

 

Networking and investor events help both founders and investors

If there’s one thing we know, it’s that VCs are time-poor. But what they can do is commit to a certain number of events per quarter/per year. Events such as the annual investment event run by SETsquared and there are others across the sector from the likes of UKBAA provide a really important platform for start-ups to access a wide range of investors that just wouldn’t be possible to meet on their own. Conversely, investors get to meet a wide range of founding teams in exciting technology areas.

It would be great to see more coordination across the sector to spread these types of events out, especially to include more founders, across the year so that investors and founders could more easily target the ones that would be more helpful to them.

 

We need a more inclusive online platform to help build connections

There are many different channels and online tools to connect on – WhatsApp, Slack, online matchmaking, and community tools out there, but what are we actually getting from them? I’m part of smaller and larger networking groups for diverse founders and VCs, and I almost think the smaller groups are more engaged.

It should be acknowledged that community building, especially from the ground up, is just so difficult. Accelerator events like Tech Nation’s Libra Programme and many of SETsquared’s programmes and events are great for bringing underrepresented communities together, but the challenge really comes when getting them consistently engaged. Persistence is the key to success in community building and I think that this message extends across many other aspects of business and networking. However, I do still think that we need a more inclusive platform to unite these communities together.

 

Working as a female Co-Founder 

With my new AI start-up, which is currently operating in stealth mode, I’m one of two female founders. It’s no secret that this is quite rare in the technology/AI space. We both knew what it was like to work within male-dominated environments – that’s just the reality of coming from a technical background – so when we met and realised that our missions were aligned, we clicked instantly.

To nurture a more inclusive environment for the sector, we’re actively hiring into the organisation with diversity in mind. A substantial portion of our team are women; however, we’re also making sure that the team we’re bringing in are from all backgrounds, improving accessibility to the tech space whilst also allowing us to access new markets when the time comes.

 

Looking ahead

A lot of founders will be looking to raise this year and of course, into 2025. They will be competing for investor’s time because investors can only talk to a limited number of founders per week. If you have an increase of 200% of founders reaching out trying to book meetings, especially if they’re all in a similar stage, it becomes very competitive. That’s where preparation comes in. I highly recommend that all founders go out there and find the right people to talk to get the advice they need to prepare them for that investor meeting or call, and always do your research to find the right investors. Your narrative and pitch deck need to be as precise as possible.

I think the little things do count. It might seem easy, but you need to have a very detailed thought process and then check all the boxes.

 

Get all of the insights on the Spin-Out Review and more in our full Investment Future Insights Report series

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