Toward Gender Equity in Startup Funding: A Conversation with Citi Ventures’ Jelena Zec and Sie Ventures’ Triin Linamagi

By Citi Ventures Staff

The startup funding landscape is notoriously inequitable, particularly along lines of gender. A 2022 Forbes article reported that just 2% of venture capital (VC) went to companies founded entirely by women in 2021, down from its high point of 2.8% in 2009.

Some change appears to be in the works, however. The same article noted that mixed-gender founding teams received 17.3% of venture capital in 2021—a 138% increase from 2020—and that “despite being less likely to raise follow-on funding, founder teams with women are more likely to exit and have a higher internal rate of return (IRR) — 112% versus 48%.”

No matter how you parse the numbers, there is broad agreement across the business community that better supporting female founders is critical to economic growth and innovation—and that the keys to doing so lie in improving representation, access to capital, and mentorship for women entrepreneurs.

In service of this vital effort, in January 2021 early-stage venture investor Triin Linamagi launched Sie Ventures, a capital platform for female co-founded businesses and investors in Europe. Among its many activities, Sie Ventures runs the Sie Catalyst Program, which positions female founders for success in raising their next funding round in part by pairing them with an experienced investor mentor—like Citi Ventures Senior Vice President of Venture Investing Jelena Zec, who recently joined the community.

In late September 2022, Citi Ventures sat down with the two veteran female investors to discuss why both the tech industry and the world could benefit from funding more female startup founders.

This interview has been edited for length and clarity.

CV: Triin, why did you found Sie Ventures and how does the firm advance its mission?

Triin: I’ve been a founder—I built companies in consumer finance and HR tech—and I’ve been in the investor’s shoes, on the founding team of The Venture Collective and as an investment manager at Founders Factory.

I started Sie Ventures because of the huge gap in venture capital going to female-founded teams, and because I’ve seen the biases in the investment decisions and processes of many investment committees. I wanted to build something that would give female founders access—not just to capital, but also to networks and to an understanding of how to navigate raising funding from VCs.

Sie’s Catalyst Program does exactly that. During a three-month program we host knowledge-sharing sessions, workshops, investor office hours, and peer-to-peer learning sessions, and we work with the best European entrepreneurs and venture capitalists—like Jelena—to share their expertise with founders. Founders also get exposure to Sie’s angel investor and VC networks throughout the program.

Since the inception of our third Program, Citi Ventures has supported the Sie team and our founders with that exposure, as well as with its knowledge of how to sell to enterprises and what the sales cycles, processes, and stakeholder management look like. In addition, Citi Private Bank is showcasing our work at the launch event of its new “Founders Network,” which seeks to forge connections and support the advancement of female entrepreneurs by bringing together entrepreneurs, family offices, and venture capitalists of all genders to explore the unique challenges faced by female founders.

At Sie, we’re not trying to replicate what other incubator and accelerator programs are already doing—helping founders launch their businesses. Instead, we focus on capital raising, decrypting investor feedback and intentions, learning which metrics to prioritize, exploring alternative funding sources, and in general working closely with founders to support them as they raise their first institutional funding round. So far, we’ve worked with 35 companies that have collectively raised more than £45MM in venture capital, including 52 checks written from our Investor Community. We’ve had a great mix of companies—mainly pre-seed and seed—that span sustainability, future of work, healthcare, fintech, AI/ML, and robotics automation. It's a misconception that women aren't technical: The majority of companies we have worked with are venture-backable, scalable tech companies.

Early in 2022, Sie Ventures made its first investments in startups from the Catalyst Program, alongside VCs from Sie’s Venture Community (Mentors). To date, 80% of our Special Purpose Vehicle investors have been women, advancing our efforts to unlock opportunities for small-ticket angel investors—typically women—who often lack access to larger venture-backed rounds. By bringing them exceptional deals they wouldn't otherwise be part of, we strive to get more wealth into the hands of women on both sides of the equation.

CV: Why should investors back female founders? What’s the business case?

Triin: Women control about 80% of household decision-making. They’ll soon control about $72 trillion of the world's wealth as well, and will inherit 70% of the wealth passing down to the next generation. They’ll start investing more and will need to better understand the opportunities. But historically, women haven’t had much access to financial services, and 70% of women are unhappy with the services they receive from banks. One of the business cases for backing female founders, then—especially in the fintech realm—is that they understand these massively overlooked markets.

Capital in women’s hands also has broader societal impacts. Women are more likely to spend money on supporting and investing in families and the communities around them, and to build businesses that have been validated by social need—addressing problems they or the people around them are experiencing firsthand. These are real-world issues that include: changing the way we manage and access health, creating fair and flexible working environments, changing how we manage and build wealth, and helping bring about a cleaner and safer world that we can pass on to the next generation.

Take the sustainability space, for example. Women are more aware of the items they are using in and purchasing for their homes and families, and are therefore more likely to be the ones adopting sustainability measures. Because of that, we at Sie Ventures believe that they are best poised to identify problems in current product offerings and innovate accordingly. Opportunities like these have largely been overlooked to date, in our opinion primarily because the majority of the VC industry is still dominated by male investors, who tend to invest in areas they understand better.

Jelena: Only 11% of investing partners in the U.S. are women, so no wonder that translates to such a low number of female-founded companies. You invest in what you can relate to, and—especially in early-stage investing—in the founders you can relate to. The founders are the key. It's almost impossible to get funding for a “femtech” startup in, say, hormonal health, because a male investor will say, “That’s a niche market,” without recognizing that it’s actually an ample opportunity for monthly recurring revenue from 50% of the population.

CV: So how do we create a more equitable VC space?

Jelena: By applying the same standards to candidates regardless of their gender. I’m often asked, “What do funders look for in a founding team?” My answer is that funders first need to focus on their own teams. If we’re saying we need to invest in companies with at least one female founder, we should replicate that balance on our own team. Yes, VC teams are including more women, but often in positions that don't have a vote on investment committees.

I recently spoke to a venture fund with three male partners. They wanted a fourth partner and they said, “It has to be a woman, but we just aren’t able to find that woman.” I asked them for their job posting, and it had a long list of requirements that none of them could even meet themselves. So there’s a double standard: the barriers are much higher for women seeking senior positions. And while there are awesome female investors out there who could step directly into senior positions, the problem often starts earlier in the cycle. A lot of funds work through referrals, and you tend to get referrals from people who are like you.

I’m not saying we should exclude men, though—far from it, in fact. Most people working in this industry are men, and we need them to be truly collaborative allies in order to bring about change.

Triin: Agreed. At Sie, men and women are equally represented among the VCs we choose as Mentors. We’re so fortunate to have super helpful male VCs who support female founders because they understand the problem in the industry and truly want to do something about it.

Jelena: Lastly, we also need to find ways to back more women who are building funds. They don't have to invest only in women. Having more women deciding whom to write checks to will naturally help distribute more capital to female founders.

CV: It sounds like part of the problem here is implicit bias. Can we create tools or policies to help counteract that?

Triin: I think firstly we should have some sort of government mandates, since the majority of the venture capital funding in Europe comes from public funding sources. For example, if VCs raise funding from public institutional Limited Partners (LPs), they would have to meet certain diversity quotas and ensure that a percentage of the capital they deploy goes to diverse funding teams. In 2019, the UK Treasury launched the Investing in Women Code, taking the first steps toward a more diverse and inclusive tech ecosystem.

We also need to start paying attention to how we diligence founders, making sure that the same standards are applied regardless of gender, race, age, or education. Research shows that male founders get asked more promotion-oriented questions when they are evaluated by VCs, like, “What do you think your target market is going to be?” whereas women get more prevention-oriented questions that force them to defend their ideas, like, “Don’t you think there are too many players within that market already?” To prevent that, a few funds have adopted a data-driven approach, using AI/ML to analyze a founder’s information before taking the first call with them. Thus, the funds’ initial decisions are made based on the performance of the company rather than on biases formed during the pitch.

Jelena: The easiest way to help rid VCs of implicit bias, in my opinion, is to show them the money—literally. We need to say, “If you invest in diverse companies, your returns are going to be higher; it’s as simple as that.” For example, a recent study found that investors targeting companies with greater gender diversity in senior management stand to make 4% higher returns, and in my experience many LPs are starting to look for diversity in the funds they back. This is creating positive change for all stakeholders—though of course we’d like it to happen faster, once that change really takes root, the sky’s the limit.

For more on Citi’s thesis around supporting women entrepreneurs, click here.

For more information on Sie Ventures’ Catalyst Program, click here.