Female Entrepreneurs Tackle VC Gender Disparity Through B2B Fintech Innovation
In today’s column, I was all set to delve into the gripping saga of Sam Bankman-Fried, the FTX co-founder and former CEO now facing a potential 110-year prison sentence following his conviction on seven counts of fraud and money laundering.
The story is as sensational as it is quintessentially American, underscoring the perpetuated myth of the “boy wonder” genius and our unwavering faith in their infallibility, even as the evidence mounts to the contrary.
But here’s the kicker: my views on what Bankman-Fried symbolizes and the dangers of placing blind trust in such figures have remained unaltered over the past year. It’s a tale that the fintech industry, as a whole, should take heed of.
Let’s remember the hubris factor, the audacious belief that one can solve problems without those directly affected in decision-making rooms.
Bankman-Fried was so audacious he even believed he could talk his way out of this predicament. Justice, however, is now being served. You can see my thoughts on the peril of idolizing billionaires and the distractions it poses to the fintech industry’s true mission here.
But today, we’re pivoting away from the SBF spotlight. Instead, we will focus on a more forward-thinking topic: the need for more female entrepreneurs in B2B fintech.
Buckle up because it’s time for a new narrative!
How B2B Fintech Unlocks Funding For Female Founders
So, in the first three quarters of 2023, fintech funding dropped, landing at $29 billion. It’s quite a change from the whopping $54 billion we saw during the same period last year, as reported by the folks at S&P Global.
But there’s a silver lining to this dip – it’s pushing fintech founders to explore the business-to-business (B2B) side of things, and guess who’s leading the charge? Female entrepreneurs.
Even though female founders make up 40% of new businesses in the U.S., they get just a teeny slice of the venture capital pie. In 2022, ventures led by at least one female founder snagged 17.2% of venture capital funds, but when it’s an all-female team, that number plummeted to 1.9%.
That’s a big gap that needs closing, especially considering that female entrepreneurship can potentially add an astonishing $5 trillion to the global GDP!
So, what’s the deal with B2B fintech? Well, it’s becoming the go-to playground for leveling the playing field. B2B software as a service (SaaS) gobbled up 44% of the funding in the first quarter, leaving B2C fintech with 34%. Investors are about encouraging founders to shift their strategies towards B2B models to increase their chances of securing funding.
Sasha Pilch, a Principal at Fin Capital, is a big believer in this shift. She thinks it will open up new opportunities for women entrepreneurs to get their hands on some venture funding.
But here’s the kicker: women currently comprise only 30% of the fintech workforce and a tiny 12% of founders, according to FT Partners. That can make it tricky for female entrepreneurs to see B2B fintech as their go-to space for building their dreams. But, a slight tweak in their business models can create brand-new opportunities and make that journey to securing capital smoother.
One success story is a female founder who initially aimed to shake up the fixed-income game with direct-to-consumer products. But then, with a nudge from Pilch, she pivoted to B2B, turning her product into a white-labeled solution. Now, her product can seamlessly integrate into existing U.K. fintech apps like Monzo, Revolut, or eToro. Sweet, right?
Kathryn Petralia, Co-Founder of Keep Financial, highlights how B2B fintech is fertile ground for women’s ambitions. It can democratize access to various services, from financial basics to personal growth and education. For women passionate about these issues, there’s an ample opportunity to level the playing field for everyone. It sounds like a win-win to me.
On top of that, venture capital firms that increase their female partners by 10% see a 1.5% boost in annual returns and achieve 9.7% more profitable exits.
Now, let’s talk about B2B vs. B2C. B2B doesn’t always get the attention it deserves because people think it’s less sexy than B2C ventures.
But Emma Zhang, Founder and CEO of PactFi, says this perception keeps valuable info about B2B fintech hidden behind closed doors.
While consumer businesses might grab early-stage attention from venture capitalists due to their initial momentum, it often leads to more competition and lower valuations over time. On the flip side, B2B ventures might start slower but can have higher contract values and sticky revenues. In simple terms, they attract significantly higher valuations. That’s music to the ears of female founders in competitive sectors looking for funding.
And here’s another twist – some fintech founders are finding success by creating a business model that combines both B2B and B2C. For instance, there’s a fintech startup called Frich that offers a social finance app for Gen Z. But they also provide a white-labeled option for financial institutions and credit unions to engage Gen Z members. It’s all about catering to different needs.
In the world of B2B, building strategic partnerships is the name of the game. The longer sales cycles transform interactions into long-lasting relationships, and that’s a significant asset. It’s not just about being a salesperson; it’s about building solid and enduring relationships that protect your company like a castle with a moat.
For women venturing into B2B fintech, there are some handy tips to remember:
- Seek out mentors and networks tailored to female entrepreneurs in fintech. These connections can offer guidance, support, and access to valuable resources.
- Embrace the power of diversity within your team – studies have shown that diverse teams are more innovative and tend to outperform their less diverse counterparts. Collaboration and inclusivity can boost creativity and problem-solving, two must-have traits in the complex world of fintech.
So, with the right strategy, support, and a focus on building lasting relationships, women are making their mark in this transformative sector. They’re driving innovation and paving the way for a more inclusive and diverse fintech landscape.
The whole story first appeared on my Forbes page, which you can read here!