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Future Fund fails BAME and female-led businesses

However the statistics were spun, the Future Fund hasn’t brought government financial support to black, minority and female-led startups. Is the extended scheme likely to be any different, asks Maddy Christopher.

6th Jul 2020
Staff Writer AccountingWEB
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On 30 June, the government extended the Future Fund to permit firms that took part in accelerator programmes to gain access to the tech startup support fund. According to the business and industry department, more than 320 early-stage firms gained access to £320m worth of loans through the scheme.

In a separate announcement, the Future Fund signed up to the government’s “Investing in Women Code.” The sentiment might be laudible, but the Future Fund take-up statistics indicate that more work will need to be done to get money into the hands of female and minority tech pioneers.

Diversity data recently released by the British Business Bank on the Future Fund confirmed the claims of critics who questioned its ethics and called for demographic data to be published. As they had predicted, women and black, Asian and minority ethnic (BAME) founders were largely bypassed by the scheme. 

Twelve out of 252 companies approved for the Future Fund scheme had all-BAME management teams, compared to 109 companies with a 100% white management team. BAME includes all minorities, so there are no specific stats for black-led startups or any specific minority.

Expanding the business definition to include the entire management team rather than founders and CEOs, and applying the term ‘mixed’ to any team without 100% white or male constituents, added a further coat of misrepresentation to over-optimistic statistics presented by the BBB. 

While mixed gender and mixed ethnicity startups cover around half of the approved loans, all-female and all-minority management teams represent 1% and 5% of approved funding, respectively.

Black-led venture capital (VC) fund Impact X reported only one of its 21 startups had gained backing from the Future Fund. “Not good statistics given that this is a government initiative and these are companies needing cash,” said Impact X CEO Eric Collins. “We have three of our companies using CJRS, I believe, because [these schemes] are just not fit for purpose.” 

Several of the companies “didn’t apply because they didn’t reach the core criteria” as they had not raised the amounts required in previous funding rounds, added Collins.

Criteria exclude diverse founders

The Future Fund requires startups to have already raised £250,000 of equity investment in the last five years. In doing so, it excludes the majority of female, black and minority founders, who are far less likely to raise such sums. As a result, 48% of black and minority business owners don’t expect to access or qualify for any government support schemes, according to YSYS and Extend Ventures research.

“We know black companies don’t have funding, and that’s a prerequisite for getting those loans,” commented Collins. “In addition to external funding, they get smaller sums. You have to raise £125,000 privately for the government to match, so you are looking for proceeds of £250k – some don’t need that much, and some can’t get that much investment.” 

The lack of diversity in senior leaders of tech startups “is well-documented”, according to Diversity CEO Francesca Warner. “Suffice to say that diverse founders are less likely to have raised at least £250,000 of funding already, less likely to have ‘warm introductions’ and therefore less likely to have access to this funding.”

By design, the fund “sadly only heightens systemic barriers that exist within the investment community which is dominated by privileged white males and built upon nepotism and classism,” said YSYS CEO Deborah Okenla. “Thirty-nine per cent of London’s VC firms don’t have any women on their investment teams, while one in five UK VCs went to Oxford, Cambridge, Harvard or Stanford.”

The gender diversity average for UK venture capitalists is worse still: for every £1 of capital invested in this country, all-female founder teams get less than 1p, all-male founder teams get 89p, and mixed-gender teams 10p, Okenla said.

VC culture: An ‘old boy’s club’

“The people who are around designing the programme don’t have any pipeline that includes minority people in any number, and that leads to a design that was not fit for purpose,” said Collins. As the funding was being developed, lots of white, male VCs were asked for input, which bedded them into the process while black VCs were left on the outside. 

A tweet from VC Fred Destin named 13 influential, male figures who influenced the Future Fund project. “I literally feel sick after reading that tweet,” wrote one entrepreneur in a WhatsApp group for female founders. “All this will do is fund the old boys’ club.”

Merian Ventures partner Priya Guha wanted to see better quality demographic data. “Whilst the self-reported stats for management teams are encouraging, using this as the measure for diversity data could be misleading. I would encourage the British Business Bank to publish the figures showing the percentage of BAME and female founders who were successful which will give a truer picture of the diversity of the Future Fund.”

Eric Collins at Impact X agreed: “We need to show the disproportionate diversity that exists. Without those stats, it is not fit for purpose as accurate diversity data. If we don’t ask those questions, then it can be dangerous and counterproductive. Without doing something about the stats, it’s pointless. This is what Impact X is doing. We are focusing heavily on the underrepresented and people of colour, and we think we can make a positive impact by direct approach.”

“Accountants are the best thing for something like this. They are critical in business because they are responsible for making sure that we actually do what should be done. They can dig right down and say that this is what we need to understand. They are at the forefront of change by demanding that we use real data, like P&L, forecasting tools and analytics to do this directly. They are all about measurement and measurement is critical.”

Replies (5)

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By BryanS1958
09th Jul 2020 11:11

So if minorities are the best at something they get the role, take football and music as examples. But if there are better candidates they don't. Seems reasonable. I don't hear the majority complaining about being under represented in football and music and so on.

I have never made a decision to hire someone based on race, religion or gender, always on who I think is best for the role. I now have to tick a box to ensure I have the right percentage of each category, rather than making a selection based on who is best for the role, who is lower risk for the finance, etc? Bizarre.

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Replying to BryanS1958:
By coops456
30th Jul 2020 16:33

You are missing the point entirely, which is that many structures and practices in society leave certain groups at a disadvantage. Those groups don't even get in the room.

Gatekeepers of any kind - from employers to teachers, investors to politicians - need to recognise the unconscious bias that we all have, and the likely impact of it.

For example, if a firm has a policy to only interview and hire Oxbridge graduates, it will implicitly exclude working-class and ethnic minority candidates, who are under-represented at those universities.

I highly recommend Wilful Blindness by Heffernan, which looks at the issue in a general business context.

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Replying to coops456:
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By BryanS1958
31st Jul 2020 17:42

I am not missing the point entirely, as I say I choose the best candidate for the job. That is, or should be, the entire objective of the interview process.

I have no unconscious bias, I couldn't care less about their colour/religion, education or anything else that is irrelevant to the 'best for the job' decision. If I consider them to be the right person for the job then that's the basis of my decision, nothing else. I don't need some bureauprat to tell me that I have to have a certain percentage of this, that or the other, even if they are not the best for the job.

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Replying to coops456:
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By SJH-ADVDIPMA
01st Aug 2020 11:32

Racism exists, unconscious bias does not exist, it’s a theory with little empirical support. The test for unconscious bias (IAT) does not reach the standard for repeatability. No matter how impressive the trainer or the slides , unconscious bias is balderdash. You’re always conscious of prejudice in its many forms. University has been guilty of teaching conflict theory and various critical theories that spring from it (which have hijacked unconscious bias) with inadequate critique and without informing students of its Marxist roots. When considering why these ideas exist and have found there way into organisations, you always have to be mindful what Marxism has given to the world time and time again: death, murder, poverty. It’s a rotten idea that really needs to be consigned to the dustbin of history.

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By SJH-ADVDIPMA
16th Jul 2020 09:22

When laws and similar instruments determine who has what job or office, thats marxism.

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