What Embedded Finance Can Do To Help Female Entrepreneurs Get Financing
A new generation of founders who may have previously felt excluded from finance and technology are now able to enter the fintech industry because to embedded finance. These founders lack a background in Wall Street or Silicon Valley.
Fintech has the potential to give more people than ever access to financial services, but regrettably, the sector still has to improve from a variety of angles. According to FT Partners’ analysis, women make up 12% of founders and 30% of the workforce. Additionally, according to PitchBook data, all-female founding teams received 1.9% of venture capital funding in 2022, down from 2.4% in 2021.
To change these numbers, venture capitalists must broaden the sectors in which they search for startup founders, and entrepreneurs must look for ways to reinvent inefficient sectors and enter the heavily male-dominated field of finance technology.
Due to the socioeconomic and racial uniformity of the sector, venture capitalists have traditionally neglected women and diverse entrepreneurs, continuing a loop in which male founders receive the majority of funding.
According to Katie Palencsar, managing director of Anthemis Group, embedded finance unleashed a group of founders with radically varied backgrounds, starting a new cycle of female leaders who increase the number of women working in fintech. According to Palencsar, the investment business has heard countless of presentations from female entrepreneurs with credentials in mobility, sustainability, law, and other fields. Anthemis Group raised more than $700 million in 2021 to invest in early-stage fintech businesses and embedded finance startups from seed to series B.
We can encourage more women to work in fintech, according to Palencsar. Nevertheless, not everyone will appear the same on paper.Consider Ami Kumordzie, the man behind Sika Health. She raised $6.2 million in January in a round that was co-founded by Forerunner Ventures and was led by a Black female physician with no prior technology background. A finance platform created by Kumordzie connects customers with businesses that adhere to the IRS regulations.
Investors can expand their pool of potential startup founders and boost the likelihood that more capital will be raised by women by opening up the fintech industry to entrepreneurs outside of the finance and technology sectors.
According to Palencsar, “founders with less conventional credentials in finance or technology were also recruiting more women who didn’t necessarily assume they would be in fintech.” It causes the network effect, as stated.
Female talent is more likely to be drawn to firms led by women. Companies with female founders create teams that are 2.5 times more female than those run by men, and those with a female founder and CEO recruit 6 times more women.
More market share
Businesses may differentiate their goods and reach a larger client base thanks to embedded finance. According to McKinsey, embedded finance generated $20 billion in income in just the United States in 2021.
As more businesses see the possibilities of this method of financing and as customer expectations for digital financial tools rise, it is anticipated that this number will expand dramatically in the upcoming years.
Companies can develop cutting-edge goods and services that provide customers more convenience and value by utilizing integrated finance. They can also keep a competitive advantage over other fintech companies in the industry thanks to it.
In light of this, firms and investors have a strong motivation to make sure integrated finance makes funding for female founders available.
In the end, discrimination against investors and female founders is perpetuated by misconceptions about fintech and biases in venture capital.
To advance, venture capitalists must invest in more women and diversity entrepreneurs in related areas, looking beyond traditional finance and technology.
Female business leaders can help advance the fintech sector by investigating answers to the problems with financial services in many industries. More female entrepreneurs will emerge as a powerful force in the financial industry with the right assistance.
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