Barclays teams with venture fund to support women-owned fintechs

Kaeya Majmundar became a serial entrepreneur in college, using an appearance on "Shark Tank" to draw attention to a startup that sold collapsible storage boxes. But when she had an idea for a payment app, there was no obvious place to go for funding.

"Raising funds was daunting. I'm a first-time non-technical founder," said Majmundar, the creator of Swaypay, a Chicago-based startup that allows consumers to earn cash back by posting creative video content about their purchase on TikTok and submitting email receipts to Swaypay.

The more user engagement the brand gets on social media through the consumers' videos, the bigger the merchant-funded financial reward. "We were building something in a way and with a founding model that didn't have a comparison that we could use," she said.

The gender gap for women-founded fintechs is substantial. Only 1.5% (16) of the 1,032 most well-funded private fintech firms globally are founded by women, according to London-based fintech research firm Findexable, which released new data in November. Innovation labs are designed expressly to locate and fund more women-founded fintech startups are trying to address the imbalance.

Majmundar found investors by working through the Female Innovators Lab, an innovation hub that's a collaboration between Barclays and Anthemis, a New York and London-based investor that focuses on financial technology startups. Startups are able to access Rise, Barclays' wider fintech hub, co-working space and Anthemis's office spaces, along with mentorship and networking. The Female Innovators Lab includes a $30 million Anthemis fund, and was expanded beyond the U.S. in September. Anthemis reports 20% of its fintech investments are in women-founded companies, a percentage it attributes to the lab.

Working with in-house recruiters and staff at the Barclays/Anthemis lab over the past 18 months, SwayPay built a staff of about two dozen, and signed partnerships with branches including Nike, Champion, Urban Outfitters and Apple. Majmundar would not disclose her firm's funding amount, but said the investors included Barclays, Anthemis, and angel investors. "It would not have been possible if I did not have the ability to scale the learning curve and create the network of support," Majmundar said.

The gender gap goes beyond funding. Findexable's research into management representation found women make up 11% of board members at fintechs and 19% of company executives. "The numbers are exceedingly low," said Simon Hardie, CEO and co-founder of Findexable. "There is enormous room for improvement."

The venture capital gap for technology startups founded by minorities is also quite large, with less than 3% of the total for all technology firms over the past six years going to minority-founded companies. The lack of existing funding, a low percentage of investment firms founded by women and people of color, and low management representation hinders the development of a network for new payment and fintech ideas to reach funding sources, according to Hardie.

"A lack of diversity isn't a problem that any one effort can solve," Hardie said. "It's also compounded by the fact that the venture capital industry is white male dominated. It's not necessarily that they are sexist or racist, but the data to benchmark isn't there in the first place."

While incubators and co-working labs for fintech startups have existed for years, the Rise/Female Innovators Lab is specifically designed for women fintech entrepreneurs to access the investment community at the earliest stages, where the inability for women with new concepts to reach funders has contributed to a large gender gap.

"The challenge is in making connections and having exposure to the right industry contacts," said Mariquit Corcoran, group chief innovation officer at Barclays, who also works on the Rise program. "These firms have had to try to make connections without much help, which is especially a problem if you are a first-time founder."

Barclays and Anthemis have run the program for two years in shared office space in New York and London, and have recently increased their capabilities to work with remote founding teams to add geographic reach. Participants in the Female Innovators Lab have the opportunity to work alongside the more than 60 startups on location and the more than 7,500 participants in the Rise Fintech ecosystem. The startups range from one to two-person founding teams to those with up to two dozen staff.

"It's great to be able to see investors in this space that can offer advice," said Eli Polanco, founder and CEO of Nivelo, a New York-based payroll technology startup which recently raised $2.5 million in a Series A round led by Anthemis.

Nivelo offers a near real-time payroll product that supports irregular disbursements to small businesses, usually with two dozen or fewer employees, that operate in the gig economy.

"We didn't know how tough it would be when we started," Polanco said, adding that there was a steep learning curve in terms of how to position the business and how to connect with the investment community that the innovators lab helped address. "It's not just about capital but looking at what every early stage founder needs. We wouldn't have found that otherwise."

The challenge for female-founded startups has been heightened by the pandemic, which has seen investors focusing on more established relationships than seed funding, further constricting access for new companies. During 2020, Series A investments fell 55% and seed funding deals for fintechs fell 45%, according to Barclays and Anthemis, which reported 2.5% of the seed and Series A funding went to women-founded fintechs.

Even as VC funding for early-stage fintech companies improves, the decline in the past year will have a lasting impact for women-owned fintechs, making it even harder to secure early investment, Corcoran said.

"The pandemic pushed things back," Corcoran said. "A lot of women had to take on more responsibilities at home and a lot of founders were impacted by that. Men were impacted too, but women felt a disproportionate impact."

Other programs similar to Rise are attempting to bridge gender and racial gaps in fintech investing.

MassChallenge, for example, is a Massachusetts-based nonprofit coalition of cross-industry firms that operates incubators and other programs for early-stage companies in fintech and other industries. MassChallenge recently partnered with Forefront, an Illinois-based racial equity organization, to add bias training to its startup program.

MassChallenge found that in its most recent startup class in 2020, 41% of the startups had at least one female or nonbinary founder, 53% has at least one founder who identifies as Black, Indigenous or People of Color, and 8% of startups had at least one Black founder. Startups that had BIPOC founders increased revenue by 47% and investments by 80% during MassChallenge's recent four-month program. There's also a financial incentive to fund more diverse companies, Hardie said. Companies that have the highest percentage of women in management are 21% more likely to outperform competitors in their industry financially, McKinsey reports.

Innovation labs can be useful in bridging the gender gap because they bring different stakeholders together for a common purpose, according to Hardie. Improvement has to come "by design," Hardie said. "Unless there is some coming together, it won't be enough."