The fintech gender gap widens as funding squeeze looms

Female fintech founders face challenging times as funding drops by two thirds, highlighting a male-dominated industry.

A reduction in funding is likely to affect female entrepreneurs disproportionately, putting dozens of fintech businesses at risk.

According to Innovate Finance, Investment in UK female-led fintechs make up only four per cent of the total investments in UK fintechs, down from 15 per cent in the first half of 2021.

Only US$400 million was invested into female-led fintechs founded across 20 deals through June compared with US$1.1bn invested across 32 deals in the first half of 2021.

The analysis highlights the widening funding disparity in fintech, as UK fintech businesses founded by men were estimated to have risen by 40 per cent in the first six months of 2022.

“The consistent highly visible down rounds in the private space and big share price hits in the public markets, in addition to the crypto crash, means that raising capital for fintech businesses looks much harder today than, say, 18 months ago,” says Thea Fisher, fintech consultant and occasional angel investor.

“Female fintech founders often lack the access to informal networks of investors that some male founders coming from more traditional finance might have.

“Although all fintech founders are facing the same market, in an environment where liquidity is hard to come by, those personal relationships become especially valuable because you are effectively fighting against a macro trend while trying to raise.”

According to the same report, 45 per cent of women founders surveyed felt able to raise equity capital, compared with 62 per cent of men.

If the reduction of funding flows towards female fintech founders continues, Fisher says we could see the investment disparity deepening further.

“In this uncertain climate, investors risk appetites are reduced, and more traditional, banking-esque fintechs with significant traction to-date are likely to see investment, while newer, ‘riskier looking’ businesses are less likely to attract investment,” the consultant explains.

“As most fintech founders to date are male, that makes the pool closing funding rounds at the moment more likely to be male. However, a recessionary environment and liquidity tightening can lead to the gestation of exciting new ideas.”

There are other positive signs of progress for female-led fintech businesses. A separate report has shown that over three-quarters of women in fintech believe their firm is inclusive, underlining women’s efforts towards building more inclusive businesses.