As a record amount of venture capital flows into the fintech industry, female entrepreneurs are lagging behind their male counterparts in attracting funding.

Firms with only female founders accounted for 3.8% of fintechs that attracted capital this year through October in the U.S., but drew proportionately less funding — just 0.9% of the total money raised by such companies, according to Crunchbase Inc., which provides data, tools and research on private companies.

With financial-technology firms raising a record $16.9 billion in the first three quarters of 2020 — up 20% from a year earlier, according to Crunchbase — companies with female founders are losing out on opportunities to develop products and attract customers even as firms started by men are able to ramp up. Fintechs founded by women continue to face bias that’s difficult to overcome, said Alaina Sparks, a managing director and the U.S. fintech practice leader at consulting firm Deloitte.

“We’re operating at this intersection of finance and technology, which are both industries that are woefully underrepresented by women in the first place,” Sparks said.

Women Raise Less
Fintechs with both male and female founders accounted for almost 11% of firms luring capital, but received 6.9% of total funding, according to Crunchbase. The share of funding for fintechs founded by women and a mix of men and women has dipped after peaking in 2017 and 2018 as they raised fewer large-dollar rounds in the past two years.

“The percentage of the pool for male founders is already big, so we continue to see more dollars going there as those rounds expand,” said Katie Palencsar, head of the Female Innovators Lab, a New York-based program run by venture firm Anthemis Group SA and Barclays Plc that supports women in fintech.

During the coronavirus pandemic, many venture capitalists have doubled down on their portfolios, providing additional support to companies they’ve already invested in, Palencsar said. Given that the majority of those firms were founded by men, “you kind of have a vicious cycle right there where that capital may have gone to female founders or diverse founders or just more founders outside that traditional portfolio mix,” she said.

Female founders trail their male counterparts in raising money across venture-backed companies in general, but the gap is particularly stark in fintech. Disparities persist at early stages of funding as well. Over the past five years, median deal sizes for female-founded fintechs at seed, series A and series B stages were smaller than those for fintechs with male or mixed-gender founders, according to Crunchbase.

Deal Disparities
Tanya Van Court, founder of Goalsetter, an expense-management and financial-education app for kids, said she was repeatedly turned away from investors when she began raising pre-seed funding in 2016. They told her that her idea wasn’t “VC-backable,” or to come back to them after she had more “traction.” Months later, however, the same investors invested in male-founded companies also building financial apps for kids, Van Court said.

“For men, it seems like funding is based on their promise,” she said. “For women, it’s based on proof.”

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