How prioritising prices has hurt businesses, consumers and the planet

Price wars push manufacturers to produce more for less, at the expense of employees and the environment, and often result in products that consumers are ultimately unhappy with, says Mei Xu, author of Burn

When I set out to look for a niche in the home fragrance industry, national big-box retailers like Wal-Mart, Best Buy, and Bed, Bath & Beyond engaged in heated competition for consumers. These stores offered everything from diapers and shampoos, to fashion items, competing for the same middle-class American demographic.

Trying to find a space in this daunting, pre-Amazon-dominated, global retail landscape meant that I had to contend with price. How does Target compete against Walmart when selling the same box of Tide detergent and bottle of Pantene Shampoo? The answer, of course, is price. Over the years, retailers advertised more and more discounts and coupons on core products, even if it meant losing margin on those items. They figured that if they could lure consumers through their doors to buy the detergent or shampoo, these customers often stayed to purchase other staples as well as impulse items like fashion, toys, and even candles.

Retailers’ race to the bottom

While national brands in the US, like Tide, have more established retail pricing, smaller brands which lack consumer brand recognition often can’t compete. Consumers expect to purchase their ‘go to’ brands at discounted prices, making their everyday purchase an impulse buy.

Retailers’ race to the bottom has meant that manufacturers are forced to ‘value engineer’ their entire sourcing and production processes. When retailers offer a discount of 20% or more, often to stay competitive during seasonal or holiday promotions, global factories must race to find cheaper suppliers to save on packaging materials, accessories, and raw ingredients.

Consider the example of candles, a product that has five essential ingredients: wax, colour, fragrance, wick, and vessel (or ‘holder’). When competing on price, factories could substitute refined petroleum wax for unrefined alternatives; switch quality fragrance oil formulas – the results of long hours of R&D – with cheaper alternatives; and replace pure cotton wicks with blended synthetic wicks that cost half the price.

Unfortunately, consumers cannot detect these manufacturing decisions when shopping. Factories know how to make cheaper products look appealing on the shelf. It is only when consumers burn the candle at home that they can appreciate the differences. As they often discover, candles with low-quality wax emit a gassy, almost petroleum-like odour. Rather than having a predictable flame that evenly consumes wax, non-cotton wicks have trouble trimming themselves, resulting in large, sometimes dangerous flames, or candles self-extinguishing as their wicks become submerged in pools of melted wax. Instead of diffusing beautiful fragrance notes into the home, such candles can send dark soot into the air and damage walls and ceilings.

Over my career, I often saw consumers returning those candles to retailers, demanding reimbursements. This represented a financial and reputational loss for retailers, factories, and supply chains, but there was little recourse if they wanted to remain in business.

Repercussions of a relentless focus

As large retailers competed with one another on price, factory owners squeezed more production out of each shift, creating a stressful and toxic work environment, while securing lower-priced raw materials that degraded the environment. This relentless focus on lower prices has been driving manufacturing into developing countries where abundant labour and a lack of worker and environmental protections enable this global low-price manufacturing and retail system.

We often hear stories about fires in garment factories that claim human lives, or waterways near textile mills becoming so polluted that residents suffer long-term health problems like cancer. When factories produce goods with the cheapest possible materials the result is that workers, communities, and the environment ultimately suffer.

I founded my company, Chesapeake Bay Candle, not to compete on price, but simply to create wellness-oriented and fashionable products that were creative and affordable. After pursuing this for more than 20 years and establishing three factories in Asia and the US, I feel that I have discovered a formula that benefits workers, protects the environment and serves the consumer. It was the best choice for my business and could hold the answer for many more retailers as well.

Mei Xu is a Chinese American entrepreneur and the Founder and CEO of three global companies – BlissLiving Home®, Chesapeake Bay Candle® and Yes She May, the latter of which is an e-commerce platform designed to help women-owned brands survive and thrive.
Xu is also the author of the memoir, Burn (Wiley, 2021).

BGA members can benefit from a discount on the RRP for Burn, courtesy of the BGA Book Club. Please click here for details.

Where and how to look for early-stage funding

Early-stage funding can often seem elusive to those eager to get their business ideas off the ground. David Pattison, author of The Money Train, outlines your options, and shares the questions you must ask yourself before you get going

Starting your own business is an amazing experience. It’s not easy – if it was then most people would do it, and most people don’t. Equally, looking for investment is very hard. There is no money tree growing in the garden that just requires a shake.

At the earliest stage of setting up a business, the whole idea of fundraising can feel daunting or even impossible. Whether you are at a Business School, a university incubator, or just a young startup, knowing where to start looks hard.

It’s also easy to underestimate how hard it is to raise money. This isn’t helped by the current market environment – 20 years ago, most people’s career ambitions were to ‘get their boss’ job’. Now, most people in their 20s want their own business. It’s an expectation that has been largely driven by the investment community.

Let me explain; there is a lot of investment money out there looking for a home. It’s hard to get but it’s there. The current model encourages young businesses and startups to take investment, or carry debt, to accelerate the growth of their companies. Not all of these businesses actually need to give equity away to investors to be successful. Some would get there anyway, albeit at a slightly slower pace and with a different financial model.

Do you need funding?

So, the first thing to do is work out if you really need to raise money through investment. Ask yourself some of the following questions:

  • What would funding add to the business?
  • How much do I really need?
  • How much time would it save?
  • What would be the costs of raising money and diluting shareholding and controls
  • What multiple of success would it add?
  • Could I run the business without funding?
  • When would I need the money?

Having answered these questions, you should have a good idea of what level of funding you need, if any. At very early stage, that might be a very small amount. It could be as little as £500 GBP, or as much as £100,000 GBP. In my experience, most founders seriously underestimate how much they need to get things going because £5,000 GBP can feel like a lot of money at a young age. For a startup, it isn’t.

You will need the first round of money to get towards proof of concept. Being able to answer these sorts of questions:

  • Does the product/service work?
  • Are people prepared to pay for it?
  • Are they prepared to buy it multiple times?

And to be able to answer the really key question: ‘I know there is a gap in the market, but am I convinced that there is a market in the gap?’

Having got to this point, don’t just jump straight into looking for investors. There are other options, particularly if the money required is at a low level. Look into:

  • Government or commercial grants
  • University business incubators which have funds available
  • Loan options            

I said at the beginning that getting an investor on board is really hard. Getting the first investor on board can feel like the hardest. But, looking for money at a really early stage can be slightly less difficult. The reasons are twofold: firstly, you are most likely to be dealing with individuals and not institutions, and secondly there are often attractive tax breaks available to these individuals. For example, in the UK there are government schemes like the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). I won’t go into details, but these schemes offer instant tax relief to individuals and even offer some relief against losses.

Emotional and rational investors

It’s worth pointing out at this stage that, in my view, there are two types of investor: the emotional and the rational. The emotional tend to be individuals who choose to invest and, at the early stages, this type of investor will almost certainly be who you will be looking to raise money from. The rational are the institutions which have to invest, as they have to commit all of their funds on behalf of their clients. The rational tend to be more formal and much more rigorous around the due diligence and legal processes.

So how do you find these ‘emotional’ individuals and how do you then get them to put money into your business? In its most simplistic form, you need to get out there with confidence and a good coherent story. Show that you know your company, your market, your people, your competition and, most of all, your opportunity and your exit strategy. You have to be prepared to sell yourself and your company/idea to a whole range of people.

Be prepared to drink a lot of tea/coffee and accept that you will be a lot of frogs to kiss before you find your prince/princess.

Sounds easy doesn’t it?

Getting out there

But how do you meet these people? Talk to everyone you know. The first place to go is the three Fs: friends, families and fools. Do not be afraid to ask. If they can’t help, they might know people who can and be prepared to introduce you. These will be your best-ever investors. They won’t be too rigorous or insistent in their demands around the shareholders agreement and may well be there if you hit a bump in the road in the future. They really want you to succeed and will probably be attached emotionally as well as rationally. Just one word of warning, make sure that these investors understand that they may lose their money. Potential investors who can’t afford to lose their money should not invest.

Approach other young businesses in the sector you are in and ask if the founders would be willing to share their ‘war stories’. You will be amazed at how many will be happy to chat to you. Don’t waste their time though. Ask them to point you in the directions of potential investors. There are also angel networks that you can approach. These tend to be more formal, but can sometimes be the solution if you are looking for a larger amount.

Talk to experienced businesspeople you or your family know. They will all know someone who knows someone. Approach experienced people that you don’t know who have been in the sector that you want to operate in. These will probably be people you don’t know. They all operate in informal networks and they will probably be able to advise on more than just fundraising. Again, other founders will know who they are.

Crowdfunding is another option, particularly if you have an interesting product that the investors can get at a discounted rate, or access to something that is unique to them.

There are other options as well, but the basic advice is the same. Get out there and find these people. Be well prepared and explore all of the options. Say ‘yes’ to every potential contact even if on the face of it there is no sense in doing it.

It’s very hard to predict where money will come from at the early stage. You need to be well prepared for all the conversations and be unfazed by disappointments. Remember that the person who is most excited and enthusiastic about your business is probably you. Don’t take someone not investing personally. One thing I can predict is that, at this early stage, money will be offered from places you don’t expect it to come from.

Good luck.

David Pattison is Co-Founder of media agency, PHD – later sold to become part of the Omnicom Group and now a worldwide brand in 80 markets. For the last 10 years, David has worked as a chair or mentor for a variety of businesses and CEOs. He is the author of The Money Train (Practical Inspiration Publishing, 2021).

BGA members can buy a copy of The Money Train at a discounted price, courtesy of the BGA Book Club. Please click here for details.

Leaders and entrepreneurs in focus: Danny Brooks, CEO and Founder, VHR Global Recruitment

Learn the dos and don’ts of running a successful business in your chosen industry before starting out on your own, says VHR Global Recruitment’s CEO and Founder

‘The key to any business is attracting and retaining the best talent,’ says Danny Brooks, CEO at VHR Global Recruitment (VHR).

With years of experience in the recruitment industry under his belt, Danny started his own company in 2003. VHR now trades in 45 countries worldwide and has an annual turnover of approximately £35 million GBP. Headquartered in London, the firm sources contract and permanent engineers for projects around the world and performs executive searches for C-suite roles.

In this interview, Danny stresses the importance of learning the dos and don’ts of running a successful business before launching a startup. ‘Gain some experience of working in a business in your chosen field before starting out on your own,’ he advises.

Can you tell us a bit about your current role and what is involves?

My current role is a combination of overseeing the running of VHR and its global operations together with meeting new and existing clients to gain an understanding of their current and future business plans to ascertain how VHR can support their project and workforce requirements.

What single piece of advice would you offer undergraduate and post-graduate students of business and management who plan to start their own companies after completing their studies?

Gain some experience of working in a business in your chosen field before starting out on your own. This will equip you with some invaluable lessons of how, and how not, to run a business.

When you do start out on your own, ensure that you get everything in writing in relation to share ownership, and that you have a good shareholder agreement.

Mentorship schemes in business are becoming increasingly popular. Who would have been your dream mentor when you were at the outset of your career and why?

Richard Branson – he has created a premium aspirational brand that transcends different sectors. His companies are seen as being fun or ‘cool’ places to work which makes attracting and retaining quality staff a lot easier. The key to any business is attracting and retaining the best talent.

What are some of the challenges and opportunities you’re currently facing, both as a leader and as an organisation?

Challenges: like many businesses, one of the main challenges we’re facing is Brexit. Any changes to employment law either here or abroad will complicate our business, that’s why we have a dedicated compliance team to make sure we’re on top of any changes that may need to be made.

Opportunities: we’re in the process of opening new offices, and now have premises in the UAE, Spain, Italy, Czech Republic and, soon, Ireland. This enables us to engage better with our international candidates, and allows us to be closer to the work our clients are doing.

Danny Brooks is CEO and Founder of VHR Global Recruitment

Bridging the gap between intent and impact

Startups should be looking to solve genuine problems in society, say brothers and Co-Founders of The Startupreneur, Aakarsh Naidu and Adhikar Naidu.

The organisation works with entrepreneurs and incubators with the goal, as Aakarsh explains, of ‘training them and helping bridge the gap between intent and impact’.

The Naidu brothers both pursued master’s degrees abroad, at the London School of Economics (LSE), but always with the intention of taking their experience and skills back to India. ‘We wanted a global exposure and to come back to India and create an impact,’ Aakarsh says.

This impact includes trying to raise awareness of the organisation’s work among new audiences, through a hip-hop music video available on YouTube. ‘It was about reaching out to new demographics in a new format and a new language,’ Aakarsh explains. Read the full interview below to learn more.

Why did you both choose to study in the UK, and why management at LSE?

Aakarsh Naidu

Aakarsh Naidu: Our father has been an entrepreneur for more than 30 years, establishing and running some of the biggest companies in India’s green energy sector, so both of us have always had an interest in pursuing business studies.

Having studied business management at undergraduate level, I wanted to specialise in human resource management at a premier institution that offered global exposure, and LSE’s MSc in Human Resources Management was a top-ranked programme. My brother, Adhikar, pursued LSE’s Master’s in Management and Digital Innovation. He was a finance graduate and was working in the investments division of Goldman Sachs, before he discovered his interest in emerging technologies.

LSE’s Department of Management was the perfect platform for both of us to explore and specialise in our areas of interest. The exposure and the global network for a student at LSE is also one of a kind.

Adhikar Naidu: I used to visit my elder brother, Aakarsh, in London, during his time at LSE. I was always enamoured by the legacy of this great institution and the diversity it brings. My brother used to have friends from different parts of the world, who would ask me if I would join the School one day. I used to say, ‘I will one day’ – without realising that I would actually do it!

What were the highlights of the programmes you studied?

Aakarsh: The top highlights for us were getting a unique global exposure and a cultural immersion with access to some of the most talented brains in the world alongside friendships that can span across continents and memories which will last a lifetime.

For me, the HR management programme I took was interdisciplinary in the sense that it gave me the opportunity to study subjects on management, economics and international relations at the same time. I particularly enjoyed the course on ‘Negotiation Analysis’, which was experiential and gave me the opportunity to work with peers across the globe, helping me understand the business and cultural nuances.

Adhikar Naidu

Adhikar: I had the opportunity to study concepts in emerging technologies like AI, augmented reality (AR) and VR, the Internet of Things (IoT), and blockchain to name a few. I also received a distinction for my thesis on the VRIO (value, rarity, imitability and organisation) framework for startups in business incubators. The programme and experience as a whole helped cultivate the spark to create an impact through entrepreneurship.

Was returning to India after completing your studies always the plan? Please explain your answer.

Aakarsh: Our reason for studying in the UK was very clear right from the start. We wanted a global exposure and to come back to India and create an impact. We wanted to create an impact in our own country while also being global citizens.

True to this goal, I’ve worked with some top startup incubators and educational institutions, such as, IIM Bangalore and the Indian School of Business. Meanwhile, Adhikar has worked with organisations like Goldman Sachs and the angel investor network, Keiretsu Forum.

Having specialised in our respective fields, we are now pooling our strengths and understanding through our own venture, The Startupreneur, through which we are building a platform to nurture entrepreneurship and innovation not only in India, but also across the world.

You’ve talked about the ‘triple bottom line’ in previous interviews. What does this term mean to you and how does this align with your organisation’s ambitions?

Aakarsh: ‘People’, ‘planet’ and ‘profit’ – these were the magical words that we learnt at LSE while studying the concept of the triple bottom line (TBL). For centuries, the term ‘bottom line’ has been synonymous with money, profit and other monetary markers such as return on investment, shareholder value and cash flow. The TBL approach adds a new meaning to this word by using the combined power of people, planet and profit to measure the health and quality of a business’ impact.

The difference between ordinary and extraordinary is that little ‘extra’ that can make you stand out as an entrepreneur among the crowd. It can take the form of social impact, issues you take up, or an organisation’s ethics and values. The organisational value for us at The Startupreneur is simple: ‘Startups shouldn’t just be about making millions but also helping millions by solving a genuine problem.’ We want to help startups develop sustainable business models that have a social impact.

What would you say is the biggest challenge facing startups and entrepreneurs in India?

Aakarsh: The biggest challenge for startups and entrepreneurs, according to us, is in moving from ‘zero to one’ [the name of Peter Thiel’s 2014 book that stems from Thiel’s teaching on startups at Stanford] and understanding the concept of product/market fit.

This is a mindset problem and requires first-time entrepreneurs to experience the process of starting up before actually starting up. This experience clears a lot of myths around business models, hiring and funding, all of which are necessary for building a successful startup. This is where Startupreneur directly works with entrepreneurs and incubators in training them and helping bridge the gap between intent and impact.

Can you tell us a bit about the startup you are most proud of being able to help get off the ground?

Aakarsh: Singling out one particular startup would be difficult as there have been quite a few startups that have excited us, and we’ve been committed to nurturing and helping them get off the ground.

A few such startups have been an AR/VR startup looking to make curricula and content more accessible to students, a startup which is developing a pollution-control device, and an app which identifies the quickest routes for ambulances to take to hospitals.

We’ve seen Aakarsh’s Startup Song video. What were the reasons behind taking up the mic in support of The Startupreneur’s goals?

Aakarsh: The reasons for coming up with the Startup Song are quite simple; it was about reaching out to new demographics in a new format and a new language (vernacular content). We wanted to create awareness about ‘startupreneurship’ and democratise the concept of ‘starting up’ to different parts of the country.

To our surprise, it achieved what its goal – the average age group of people watching earlier videos from The Startupreneur was about 25-35. However, viewership for the Startup Song was primarily in the age range of 18-25 and was spread more widely across India, thereby reaching new demographics. The best compliment we have received was a startup founder mentioning that her three-year-old was also singing ‘startup, startup, startup’ after listening to the song. That was heartening to hear!

Aakarsh Naidu is an alumnus of the London School of Economics (LSE), Startup Ecosystem Enabler, and is Co-Founder and CEO of The Startupreneur. He has led initiatives at IIM Bangalore’s startup incubator  (NSRCEL) and is a mentor at the Founder Institute, World Resources Institute (WRI), and Catalyst for Women Entrepreneurship (CWE).

Adhikar Naidu is Co-Founder and COO at The Startupreneur. He previously worked at Goldman Sachs in India and the US, and has been a speaker at national and international events, such as Google for Startups and Esprit Entrepreneurs. He holds a master’s degree in management and digital innovation from the London School of Economics (LSE).

Leaders and entrepreneurs in focus: Leyanis Diaz, Founder at Major Marketplace

A Cuban-American master’s in entrepreneurship graduate on how Business School has helped her company to support minority-owned businesses

‘I felt like I was more equipped to become someone else’s CMO than my own CEO,’ says Leyanis Diaz, who launched her own company on the back of a distinguished set of experiences in communications.

When Leyanis enrolled at Business School, she said she, ‘felt like I had no support or help in building my business’. However, by the end of her programme, she says the experience was, ‘the best thing I could have done for myself and for the business’.

That business is Major Marketplace, a platform that aims to change the narrative regarding minority business enterprises (MBEs) by providing them with support, marketing services and brand growth.

Read on to learn more about Leyanis’ work, what she took from her time at Business School and why she believes Oprah Winfrey, ‘is a champion for women and for people of colour everywhere and an inspiration to us all’.

Can you tell us a little bit about your current role and what is involves?

I am the Founder of Major Marketplace, which connects small minority-owned businesses with those who want to support them. It is a unique programme that is on a mission to keep more minority businesses in business by showcasing their innovative and cutting-edge products to a global audience while providing them with the support, connections and education to scale.

Currently, I am a solo founder, which means I do it all: marketing, operations, customer service, human resources, sales, finance, and so on. But I love what I do, and I know that I am making an impact on those who need it most – minority businesses are the heart and soul of communities like the one I grew up in [in Miami, Florida].

Did your Business School experience help get your business off the ground? If so, how?

My Business School experience gave me the tool box I needed to run Major Marketplace. I started the company before attending University College London’s (UCL) School of Management master’s in entrepreneurship programme.

Before attending UCL School of Management, I felt lost and felt like I had no support or help in building my business. Enrolling in the entrepreneurship programme was the best thing I could have done for myself and for the business. The School gave me access to experts, advisors, mentors, resources, funding, support and a global network that I can tap into today and in the future.

What single piece of advice would you offer undergraduate and post-graduate students of business and management who plan to start their own companies after completing their studies?

You do not need to know it all and don’t be afraid to ask for help or to ask what you might think is a dumb question.

My background is in communications. During my undergraduate degree, I studied marketing, PR, television and radio and after graduating, I went on to work for companies such as Nike and Ford. While I was good at what I did, I did not know the first thing about business when I first started my own company. I felt like I was more equipped to become someone else’s CMO than my own CEO.

When I first started, I spent a lot of my time focusing on what I did not have instead of what I did have. [I now appreciate the importance of] understanding what your strengths are and more importantly, what your weaknesses are so you can build a team around you to fill those gaps and seek the help that you need when you need it with more clarity.

Mentorship schemes in business are becoming increasingly popular. Who would have been your dream mentor when you were at the outset of your career and why?

My dream mentor has always been Oprah Winfrey because she is everything I am working to be, a media maven, a philanthropist, an activist, and a businesswoman. She faced many trials and tribulations during her childhood and early on in her career as a black woman in media, but she had a choice to make, she could give up and go home, or keep going and face her obstacles head on.

She did the latter and became the person we all know and love. Today, she is a champion for women and for people of colour everywhere and an inspiration to us all. With Oprah as my mentor, I would have grown as both an individual and as a businesswoman.

What are some of the challenges and opportunities you’re currently facing as a leader?

As a leader, some of my current challenges include being a solo founder and managing my time effectively, filtering through the advice and feedback I receive, and managing my expectations and the expectations of others.

However, my opportunities include graduating from a world-leading university, my background and perspective as a Cuban-American immigrant and as a woman of colour, and the relationships I have made through my work in the community.

Please outline the importance of corporate social responsibility (CSR) to your company’s strategy and why you feel it is important to business approaches as a whole today.

CSR is of great important to Major Marketplace. Corporations’ ability and desire to support initiatives, projects and businesses that align with their interests and values and that have an impact are both interesting and potentially fruitful for us.

CSR is important to business approaches as a whole today because our companies have an effect and influence on people and our planet. To me, CSR is about understanding that what you do has consequences, whether they are good or bad, and about trying to do right by others not because it makes you look good but because you care.

Which three words best describe your approach to leadership (or your management style) and why?

The three words that best describe my approach to leadership are ‘transparency’, ‘empowerment’ and ‘collaboration’.

‘Transparency’ because as the Founder of Major Marketplace, I have to be honest with my team, the minority businesses we work with, and our partners, customers and other stakeholders.

‘Empowering’ because I have to empower those I work with, so they can empower and encourage minority businesses that, in turn, empower their communities.

‘Collaborative’ because I know that there is no ‘I’ in team. In order for us to make the biggest impact on the world, we have to work with others who understand what we are building and are passionate about building a better future together.

Leyanis Diaz is the Founder of Major Marketplace, an online marketplace that works to support minority-owned businesses by providing them with education, merchandising, and connections to a global audience. An extended version of this interview has previously been published on Medium.

Why female startup founders find it harder to secure investment

Venture capitalists don’t ask male and female founders the same questions when making investment decisions, and hold a number of preconceptions, says the founder of a network aimed at empowering women

We hear a lot about getting more women on boards, more female CEOs, more girls to study STEM subjects. But there is another significant gender gap much less talked about.

It is the one affecting female entrepreneurs. Several reports have shone a light on this. For example, a 2019 study by the British Business Bank found that for every £1 GBP of venture capital (VC) investment in the UK, female founders got just 1p (£0.01 GBP). Mixed gender founder-teams got 10p (£0.1 GBP), and the rest? It went to all-male founders. That’s equates to £5bn of investment going to all-male founders.

The situation in the US is no different. One study, by Pitchbook, showed that companies with female founders only raised 2.3% of VC funding in the US.

As a two-time startup founder myself, I was invited to 11 Downing Street for the unveiling of the British Business Bank research, commissioned by the UK Treasury. It was also attended by VCs, so to my delight I got to ask that key question: ‘why don’t investors put their trust in women?’

Implicit bias and preconceptions

Their answers were honest, but brutal. Some confessed that when they see a young woman, they assume that her incentive to start a business is to leave the rat race to juggle a bit of work with the real job of being a mum. This is essentially labelling any women within a 20-year child bearing window as a ‘mother with a hobby.’

This is compounded by the inconvenient fact that the average age of founding a business is 42, according to researchers from MIT, the Kellogg School and the US Census Bureau. Among the fastest-growing tech startups, the average age is 45. This age is for men and women, so clearly it has nothing to do with wanting to make time for school runs. It takes life experience and industry expertise to run a successful business – 42/45 seems about right to me.

Another VC partner admitted he always sends a junior 20-something trainee to interview the female founders but is inclined to send someone more senior to male founders.

I’ve been in that pitching chair myself when I started to seek funding for my first startup in 2016. It was around the time that the #MeToo movement was gathering momentum and I thought, ‘it’s time to get big or go home’. Yet, when I started early conversations with investors, or people who knew about investing, I got a distinct feeling of doubtfulness. Their questions seemed to be negatively slanted: ‘don’t you think the bubble might burst?’ instead of the more positive ‘where do you see your business in X years.’ Other women have said similar things.

Lines of enquiry at investor interviews

My suspicions of this negative interview bias have turned out to be substantiated. A 2017 study by researchers at Columbia University and Harvard Business School looked at 189 videos of presentations to investors (of which 12% were given by female entrepreneurs). They found that 67% of questions to the male entrepreneurs were ‘promotion-oriented’, such as, ‘do you think your target market is a growing one?’ For female founders, 66% of questions were ‘prevention-oriented’, asking them questions along the lines of how long it would take them to break even or how they’d defend a business challenge.

Investors are supposed to be good at spotting trends. So you would think that they’d have taken notice of the many reports that show that female-founded businesses end up being more successful. Linked to the British Business Bank research, the UK Treasury also commissioned the Rose Review, looking at ways to promote female entrepreneurship. One of its conclusions was that female-founded businesses could be worth £250bn GBP to the UK economy if women started and scaled new businesses at the same rate as UK men.

Eliminating doubts

I can see why. I’ve had three children over five years, while running two businesses and I never took maternity leave. My businesses grew the most when I was pregnant. People joke that when women are pregnant they go into ‘the nesting phase’ because they are programmed to get their house in order but actually it’s a hyper-efficient state which applies to all areas of life, including their business. Think about it, you’re not likely to be attending parties or socialising in bars. You’re not distracted by anything else. Pregnant women get things done!

We can’t fully blame the funding gap on ‘old boys network’ bias though. Women themselves need to put themselves forward more. In the same way that women don’t ask for pay rises as much as men, on average, they also tend to harbour more doubts that they have the skills to grow a business. They can suffer from imposter syndrome and worry themselves out of things. If nine people say ‘yes’ and one says ‘no’, a sizeable proportion of women will listen to the one ‘no’.

Start early

So how can we address the problem? It should start at grassroots level, with teachers and parents. Gender biases stem from the messaging we give to children as they grow up. We need to instil in them the belief that they can make something of themselves regardless of gender.

Take the cringeworthy example of the covers of recent editions of teenage publications, Girls’ Life and Boys’ Life. The former flashed headlines that include ‘fall [autumn] fashion you’ll love’, ‘wake up pretty’ and ‘your dream hair’. The latter featured one bold headline, ‘explore your future: astronaut, architect, firefighter, chef?’

It will take time to fix this skewed messaging. But in the meantime, the VC industry could do a lot to help address the problem by educating their teams. They could put on workshops and seminars to hear from female founders, or invite successful female entrepreneurs to give talks that allow them to share their expertise and inspire others.

That’s what we are doing with the Sistr network, a platform to enable women to impart wisdom and offer advice, free from bias and judgment. My vision when I started the network was to harness untapped female talent by connecting strong, successful and knowledgeable women. Perhaps investors and VCs could learn something from this approach. They might even pick up some star-performing portfolio companies too.

Emma Sayle is the CEO and Founder of networking platform, Sistr.