Connect with us

Markets

Female founders take declining share of fintech funding

Published

on


Fintechs are often the vanguard of the financial services industry, boldly going where no banks, insurers and asset managers have gone before and smashing barriers as they do so.

Gender barriers, however, are a different matter.

There have been several breakthroughs for women on Wall Street over the past few weeks, with Citigroup teeing up Jane Fraser to become the first female chief executive of a major bank, while JPMorgan and Goldman Sachs both made important female promotions.

Meanwhile in Fintechland, a new report from Deloitte shows the share of funding going to female-founded ventures is tiny — and falling.

Women-led fintechs attracted just 1.3 per cent of the $40bn invested in the sector last year, Deloitte found, compared with the 87.4 per cent hoovered up by male-founded ventures (the remainder went to fintechs with co-founders of both genders).

That’s a deterioration, albeit a slight one, on the 1.43 per cent of the investor pie that women-led fintechs attracted in 2018.

Column chart of investment in fintechs by gender of founder ($m) showing The investment gap

If you were after a silver lining you could point out — as the authors at Deloitte did — that the share of investment won by female founders is up over a five-year period, since it was just 0.43 per cent back in 2015. Or that the share of fintechs founded by women is increasing, which should in time lead to women-founded fintechs winning a bigger share of the bounty.

But while there are prominent female founders in the sector — such as Anne Boden at Starling and Jessica Holzbach at Penta — there’s no escaping the fact that fintech remains a very male-dominated industry.

“When you step back and you say, OK, last year we’re still looking at 3 per cent [of fintechs founded by women] and . . . we’re still seeing just over 1 per cent of funding going to women, [that] is probably more of a shock than we had anticipated,” says Alaina Sparks, one of the authors of the Deloitte report.

Ms Sparks, nonetheless, describes herself as an “optimist” about the future.

In the report, Deloitte argues that investors, particularly venture capital firms, can make “meaningful change” by being consciously gender blind when they assess companies, and by having more women on their own teams, since female investors tend to be better disposed to female-led firms. Financial institutions can also be catalysts for change, including pledging to support “gender diverse companies” as Goldman Sachs did with a $500m fund a few years ago.

While much has been written about the pandemic hurting progress on gender equality as women disproportionately absorb childcare responsibilities, Deloitte argues that the Covid-19 environment could actually help female fintech founders.

“As companies aim to recover from the financial impact of the Covid-19 pandemic, they will need to run a tight ship while exploring all viable options for growth,” Deloitte wrote. “This should include investing in women entrepreneurs, who have proven themselves to be as capital-efficient and capable of generating high returns as are men, if not more so.”

In a commentary with the report, Carole Crawford, chair of 100WFinTech Committee, an initiative to raise the profile of women in fintech, argues that “the pandemic can be an opportunity for change and catalyst for growth for women in fintech.”

“Female fintech founders have excelled during this crisis, in part because of their ability to handle uncertainty, collaborate with others . . . and home in on the needs of the customer,” she added.

The early Covid-era signs are not encouraging. In the first six months of the year, female founded start-ups attracted just under 1.1 per cent of the $12.9bn invested in fintechs, a slight deterioration from their 1.3 per cent share in 2019.

Traditional finance looks set to hold on to its diversity crown for quite some time, relatively at least.

Quick Fire Q&A

Company name: Laybuy

When founded: 2017

Where based: Auckland, New Zealand

CEO: Gary Rohloff

What do you sell, and who do you sell it to: Laybuy is a “buy now, pay later” provider allowing customers to pay for goods in six weekly instalments, interest-free.

How did you get started: A family conversation about buying a pair of jeans and why there wasn’t an alternative to credit cards.

Amount of money raised so far: The recent IPO in Australia has resulted in raising $A80m to fund growth in the UK.

Valuation at latest fundraising: At listing, valued at $A246m

Major shareholders: Gary and Robyn Rohloff and Pioneer Capital

There are lots of fintechs out there — what makes you so special: We’re a rapidly growing company with a commitment to being the most responsible and trustworthy provider in our sector.

Further fintech fascination

Dealmakers: UK funding platforms Crowdcube and Seedrs are to merge, reports Sifted. Crowdcube shareholders will own 60 per cent of the combined business. Since 2011, the two companies have raised over £2bn for 1,500 companies. However Seedrs has said that funding on its platform fell earlier this year because of the pandemic.

Dealmakers (2): Italian payments companies Nexi and Sia will merge in a €15bn deal that has been under negotiation for two years, says the Financial Times. The new group will be Europe’s largest payments provider in terms of merchant servicing. The company will have combined revenues of almost €2bn.

Wirecard fallout: A whistleblower at EY warned the firm four years ago about potential fraud at Wirecard, reports the Financial Times. EY audited the company for more than a decade and provided unqualified audits until 2018. Meanwhile, the authorities in Singapore have told Wirecard to stop providing payment services in the city state.

Trendwatch: Sifted sat down with Eileen O’Mara, co-head of Stripe’s European business, to ask her about the US payment specialist’s growth plans and its reaction to the pandemic. She also spoke about open banking, the potential for acquisitions and the tech scene in Europe more broadly.

Follow the money: French start-up October has raised $300m, which it will use to invest in small- and medium-sized companies on its lending platform, reports TechCrunch. The money will be deployed over the next few years. The company works with businesses in France, Spain, Germany, Italy and the Netherlands.

AOB: Kazakh fintech Kaspi has revived plans for a London IPO, says the Financial Times; National Australia Bank has taken a stake in UK fintech Pollinate, according to Finextra; Lloyd’s of London has launched Parametrix, a policy that pays out automatically if IT services are disrupted, reports Reinsurance News; Japan’s NEC has bought Avaloq, a Swiss provider of software for banks, reports the Financial Times.



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets

Earnings beats: lukewarm reaction shows prices are stretched

Published

on

By


Investors are picking over first-quarter results for signs of economic recovery and proof that record market highs can continue. Stock markets have only been this richly valued twice before — in 1929 and 2000. Bulls hope strong corporate earnings and rising inflation can pull prices higher still. But pricing for perfection means even good results can be met with indifference.

L’Oreal illustrated this trend on Friday. The French cosmetics group stated that sales in the first quarter of the year rose 10.2 per cent. This was a better performance than expected. Yet the announcement sent shares down by around 2 per cent. Weak cosmetics sales were seen as a veiled warning that consumers emerging from lockdowns might not spend as freely as hoped.

Online white goods retailer AO World, a big winner from pandemic home upgrades, also offered a positive update this week. In the quarter that marked the end of its financial year, sales were £30m ahead of forecasts. But even upbeat commentary from boss John Roberts could not stop shares slipping 3 per cent.

Banks are not immune. Their stocks have outperformed the market by 7 per cent in Europe and 12 per cent in the US this year. But stellar Wall Street results were not enough to satisfy investors this week.

JPMorgan Chase, the biggest US bank, smashed expectations for the first quarter. Even adjusting for the release of large loan loss reserves, earnings per share beat expectations by 12 per cent because of higher investment banking revenues. Bank of America earnings also rose thanks to the release of loan loss reserves. Yet shares in both banks ended the week down. Goldman Sachs had to pull out its best quarterly performance since 2006 to hold investor interest.

On multiple metrics, stock valuations look steep. On price to book, banks are now back to the pre-crisis levels recorded at the start of 2020. Living up to the expectation implicit in such valuations is becoming increasingly hard.

Lex recommends the FT’s Due Diligence newsletter, a curated briefing on the world of mergers and acquisitions. Click here to sign up.



Source link

Continue Reading

Markets

Barclays criticised for underwriting US private prison deal

Published

on

By


Barclays has attracted criticism for underwriting a bond offering by the US company CoreCivic to fund the building of two new private prisons, in a new dispute over Wall Street’s relationship with the controversial sector.

The UK-based bank said two years ago that it would stop financing private prison companies, but the commitment did not extend to helping them obtain financing from public and private markets.

About 30 activists and investors, among them managers at AllianceBernstein and Pax World Funds, have signed a letter opposing the $840m fundraising for two new prisons in Alabama, which was due to be priced on Thursday.

The signatories said the bond sale brings financial and reputational risk to those involved and urged “banks and investors to refuse to purchase securities . . . whose purpose is to perpetuate mass incarceration”.

Activists and investors who pay attention to environmental, social and governance issues have sought to cut off companies that profit from a US criminal justice system that disproportionately incarcerates people of colour. As well as raising ethical issues, many also say such financing may be a bad investment because legislators are increasingly calling for an end to the use of private players in the prison system.

While Barclays is not lending to CoreCivic, activists and investors attacked its decision to underwrite the deal, which is split between private placements and public issuance of taxable municipal bonds. The arrangement is “in direct conflict with statements made two years ago” when the bank announced it would no longer finance private prison operators, according to the letter.

Barclays said its commitment to not finance private prisons “remains in place”, adding it had worked alongside representatives from the state of Alabama to finance prisons “that will be leased and operated by the Alabama Department of Corrections for the entire term of the financing”.

CoreCivic said the Alabama facilities will be “managed and operated by the state — not CoreCivic. These are not private prisons. Frankly, we believe it is reckless and irresponsible that activists who claim to represent the interests of incarcerated people are in effect advocating for outdated facilities, less rehabilitation space, and potentially dangerous conditions for correctional staff and inmates alike.”

Barclays’ 2019 commitment to limit its work with private prison companies came as other banks, including Wells Fargo, JPMorgan Chase and Bank of America, also said they would stop financing the sector.

Critics said they were not sure why Barclays is differentiating between lending and underwriting.

“You’ve already taken the stance, the right stance, that private prisons and profiting from a legacy of slavery is bad,” said Renee Morgan, a social justice strategist with asset manager Adasina Social Capital, one of the signatories of the letter. “But then you’re finding this odd loophole in which to give a platform to a company to continue to do business.”



Source link

Continue Reading

Markets

Hedge funds post best start to year since before financial crisis

Published

on

By


Hedge funds have navigated the GameStop short squeeze and the collapse of family office Archegos Capital to post their best first quarter of performance since before the global financial crisis.

Funds generated returns of just under 1 per cent last month to take gains in the first three months of the year to 4.8 per cent, the best first quarter since 2006, according to data group Eurekahedge. Recent data from HFR, meanwhile, show funds made 6.1 per cent in the first three months of the year, the strongest first-quarter gain since 2000.

Hedge fund managers, who often bet on rising and falling prices of individual securities rather than following broader indices, have profited this year from a rebound in the cheap, beaten-down so-called “value” stocks and areas of the credit market that many of them favour. Some have also been able to profit from bouts of volatility, such as the surge in GameStop shares, which turbocharged some of their holdings and provided opportunities to bet against overpriced stocks.

“We’re going into a market environment that is going to be more fertile for most active trading strategies, whereas for most of the past decade buying and holding the index was the best thing to do,” said Aaron Smith, founder of hedge fund Pecora Capital, whose Liquid Equity Alpha strategy has gained around 10.8 per cent this year.

The gains are a marked contrast to the first three months of 2020, when funds slumped by around 11.6 per cent as the onset of the pandemic sent equity and other risky markets tumbling. However, funds later recovered strongly to post their best year of returns since 2009.

This year, managers have been helped by a tailwind in stocks and, despite high-profile losses at Melvin Capital and family office Archegos Capital, have largely survived short bursts of market volatility.

It’s a “good market for active management”, said Pictet Wealth Management chief investment officer César Perez Ruiz, pointing to a fall in correlations between stocks. When stocks move in tandem, it makes it more difficult for money managers to pick winners and losers.

Among some of the biggest winners is technology specialist Lee Ainslie’s Maverick Capital, which late last year switched into value stocks. Maverick has also profited from a longstanding holding in SoftBank-backed ecommerce firm Coupang, which floated last month, and a timely position in GameStop. It has gained around 36 per cent. New York-based Senvest, which began buying GameStop shares in September, has gained 67 per cent.

Also profiting is Crispin Odey’s Odey European fund, which rose nearly 60 per cent, having lost around 30 per cent last year, according to numbers sent to investors.

Odey’s James Hanbury has gained 7.3 per cent in his LF Brook Absolute Return fund, helped by positions in stocks such as pub group JD Wetherspoon and Wagamama owner The Restaurant Group. Such stocks have been helped by the UK’s progress on the rollout of the coronavirus vaccine, which has raised hopes of an economic rebound.

“We continue to believe that growth and inflation will come through higher than expectations,” wrote Hanbury, whose fund is betting on value and cyclical stocks, in a letter to investors seen by the Financial Times.

Additional reporting by Katie Martin

laurence.fletcher@ft.com



Source link

Continue Reading

Trending