Crunchbase CEO: Funding in minority and women-led start-ups ‘shockingly low’Jenny Darmodyon January 4, 2022 at 15:00 Silicon RepublicSilicon Republic


While the business world changes all the time, start-ups have always been moving at a faster pace due to the very nature of their growth.

An increasing investment appetite in recent times has also shown that momentum for start-ups is set to continue.

An Atomico report from the start of December showed that European tech investment is set to reach all-time high in 2021, having already hit a record high in 2020.

2021 also became the year of the ultra-high value decacorns, or new start-ups valued at $10bn or more, with 30 companies joining the club.

And closer to home, Irish tech start-ups raised record €932m in first half of 2021 and the latest Irish Venture Capital Association survey showed a renewed appetite for early-stage companies.

To find out more about how the start-up scene has been evolving, I spoke to Jager McConnell, CEO of Crunchbase.

While the industry is constantly changing, McConnell said the biggest changes have taken place since the pandemic shut down a lot of the world in March 2020.

“There has been a ton of disruption to the way start-ups actually get work done as they transition to a remote-first mind frame. Philosophically, successful start-ups are moving from prioritising the company to prioritising the individual,” he said.

“To attract and retain talent, it’s become crucial to ask questions like, ‘How do you work best?’ or ‘When do you have to pick up the kids?’.”

As with many employers, the pandemic has changed the real estate landscape for start-ups too, with less of a need for office spaces in the new remote world. “Benefits are changing as well. Ping pong tables and lunches aren’t really a thing. Offering perks like childcare coverage or home office stipends makes a lot more sense.”

A more remote world has also led to better access to a more diverse talent pool for start-ups too. “With remote work, you can’t claim to have a pipeline problem. You can literally hire from anywhere in the world,” he said.

Equally, McConnell said investors can no longer just stay in Silicon Valley and instead have to look globally for opportunities. “Basically, everything has been disrupted.”

Growing industries

The record-breaking funding and investment in 2021 means there have been plenty of growth opportunities for start-ups across several industries.

One area of particularly strong growth is in fintech. In Ireland, the fintech sector secured $900m of investment and equity transactions in the first half of this year, according to a KPMG report.

A total of 18 M&A, venture capital and private equity deals combined to break the previous half-year record of $700m set in 2011 and to firmly beat the $329m secured in all of 2020.

This tracks with Crunchbase’s data, which saw the financial services industry grow more than 150pc year over year as of November 2021 according to McConnell.

“Much of that growth has been driven by companies in lending and payments. With digital transactions and trading becoming increasingly ubiquitous and even cracking into the mainstream, I’d expect much of that growth to continue,” he said.

“Investment into biosciences has absolutely boomed, which is not surprising given the pandemic. Crunchbase data shows that investments into venture-backed start-ups in biotech and healthcare jumped from $82bn in 2020 to $108bn in 2021 [as of November 2021].”

Another area of growth due to the pandemic was in the areas of e-commerce and edtech, which McConnell said are receiving more VC funding than ever.

“Even as the Covid 19’s impact diminishes, I expect that new consumer habits in these industries are here to stay and will continue to drive growth,” he said.

“I’m also feeling bullish about start-ups in the travel and tourism industry. We saw a dip in 2020 funding for obvious reasons, but it is already back at 2019 levels with more room to grow.”

Creating company culture

While there are so many opportunities for growth for start-ups, entrepreneurs must also be aware of the challenges they face, particularly when it comes to their employees.

Maintaining company culture in a remote environment is a major challenge for companies and one that start-ups are not immune from.

“I recently read a study that found nearly half of surveyed employees who sometimes work remotely reported feeling isolated or disconnected. That’s a huge problem,” said McConnell.

“Company leaders need to work every day to find a balance that satisfies introverts, extroverts and everyone in between. This is especially key when you consider how difficult it is to hire and hold onto talent in the current market.

“As a potential solution, start-ups need to think deeply about how they can give back to the community. Employees probably won’t join your company for money alone and they certainly won’t stay for money alone. To foster loyalty, you need to show your employees how their work is doing something good for the world.”

‘I’ve had people tell me there is no racism in Europe because there’s no data to point to’

Company culture must go beyond making the employees you have feel happy. There has been a diversity and inclusion problem in the tech sector for decades so it’s vital that start-ups take the opportunity of being new to create a diverse and inclusive culture from the get-go.

However, inequality in venture capital is still a major issue in the ecosystem and not one that can be controlled by the start-ups themselves.

In August 2020, Crunchbase released Diversity Spotlight, a new feature to shine a light on inequality in VC funding. The feature allows users to see a VC firm’s commitment to diversity.

“Through Diversity Spotlight, we’ve found that investment in minority and women-only founded start-ups is in fact shockingly low. Crunchbase data shows that companies with solely female founders raised just 2.2pc of all venture funding for the first eight months of 2021. That’s a lower share than any of the previous five calendar years,” said McConnell.

“Black start-up entrepreneurs received just 1.2pc of funding through the first half of this year. The non-profit LatinxVC found that only 2pc of partner-level investment professionals are Latino or Latina. These figures are staggering.”

McConnell also notes that he can’t tell how much funding has gone to black entrepreneurs in Europe due to GDPR.

“The spotlight is off and there is no accountability to speak of. I’ve actually had people tell me there is no racism in Europe because there’s no data to point to. Of course, there is a lot of good stuff in GDPR too, but it’s more of a double-edged sword than people think.”

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