What will it really take for more underrepresented founders to secure investment?

Recently I was invited to attend an Innovate UK workshop to design a package of support to improve diversity and inclusion in investment readiness.

This was an invitation only event - and, to attend, you had to submit a proposal explaining you should have a voice at the table. It felt both a privilege, and an affirmation of all that I stand for, when I was invited to attend. The first day of the two-day event also happened to fall on my birthday and I was excited to be gifting my time to bring about change in early-stage investing.

Let’s face it, change is needed. If you are a female founder, an ethnically diverse founder or even if your business is based outside of London the odds are stacked against underrepresented founders raising investment. I recently wrote an article for Maddyness on how equity investors can better support underrepresented founders which summarises some of the issues.

50 organisations were invited to participate in the two day co-design workshop. It was good to see so many different organisations - large and small, new and established - come together in one room united by the aim of designing a package of support to ensure more diverse founders achieve success when it comes to raising equity investment.

We spent two long and intensive days reviewing the challenges faced by underrepresented founders, brainstorming possible solutions and exploring how we might collaborate to deliver better support.

The challenges - a long list which I’ve tried to summarise here - seem to be well understood and include:

• Access to specific investor readiness education to improve practical understanding of the process of raising investment, the detail that investors require, demystifying the language used by investors and the roles different types of investment play at different stages in a startup's development.?
• Structure and accountability - raising investment can feel like a full time job, and founders already have a full time job running their business, so providing a step-by-step approach, prioritising activity and providing accountability makes it quicker and easier for startup founders to take the necessary steps to deliver results.
• A strong network - not just of investors who are open to backing underrepresented founders but also of mentors who can provide fresh insights, build out options and explore alternatives with founders
• A supportive community - a safe space made up of peers, mentors and advisers where founders feel supported in testing their ideas, practising their pitch and gaining constructive feedback. A group with whom you can share the journey, gain advice, maintain motivation and generate options when things don’t go to plan.

Do these resonate with you?

So far so good. What proved more difficult was reaching agreement on the best way to solve these challenges.

There were lots of ideas and some consensus but - surprisingly quickly - self-interest led the conversation. Innovate UK have ￡1.5m to offer to a handful of consortia who develop and offer an appropriate suite of services. It was like being in an episode of “The Apprentice”, everyone wanted to impress “Sir Alan” with their offer, skills and solution. There was also a flurry of activity as organisations vied to form consortia. Vision for industry-wide change went out of the window. Plans for spending money came to the fore. Of course, some of these plans will help solve some of the challenges, but I couldn’t help feeling we had missed an opportunity.

I am not convinced that bringing money to the table (to offer services that are free at the point of delivery) is the right change agent.?

Founders are not always well-served by “free” services - corners get cut in what is offered because there isn’t really enough funding to design the required service. What’s more, if something is free you don’t always value it. Founders offered free training don't always have sufficient “skin in the game” to continue taking action when the going gets tough. And, let’s face it, raising funding is tough right now!

Focusing on startups only solves half the problem too. We need to see changes on the investment side too. More diverse investors - for sure - but also investment for a wider range of business models. Why are investors so committed to a “one size” investment model that sees “tech” and “SaaS” scooping up all the investment??

My feeling is we need a more collaborative approach to investment. Whilst the “them” and “us” (“investors” and “founders”) model persists startups will continue to “pitch” and investors will continue to “screen” investments. This is not productive behaviour. It wastes everyone’s time.?

We need mutual understanding (and I don’t mean more “office hour” type events where wisdom is imparted in a generic way), greater honesty and transparency about when and how investments are made by different types of investors and new investment models for recognising value and supporting early-stage businesses to give them runway to grow without the constant focus on fundraising! If we can achieve this I believe there is a win-win opportunity for everyone - investors and startups alike.

Does this resonate with you? Maybe you disagree? I’m interested to hear all views! Tell me what you think would significantly improve early-stage investment for you - whether you are a startup founder or an early-stage investor.?