Samantha vs. Samuel: How investors can address the funding gap in Japan

When I walk into a meeting room in Tokyo, I’m invariably met with a polite smile and often a veiled expectation that someone else might be walking in behind me.

Well, it’s just me.

My name is Sam – short for Samantha, not Samuel. As a foreign founder, CEO, and a woman, I sometimes sense rewiring going on in the minds of people who were expecting to meet a man instead.

I’m used to the fintech sector where women are underrepresented. It’s everywhere, from decision-making and entrepreneurship to investing and even access to financial advice.

This has to change.

Image credit: Timmy Loen

Numbers don’t lie

I’ve been raising money for my startup in Japan and globally for the past 18 months (and for much longer as an investor), and it’s important to pay attention to the cues I get when pitching. I’ve also been focusing on how investors react when I ask about diversity in their portfolios.

Few investors are willing to answer how they track diversity across their portfolios. Fewer still offer convincing answers to my questions.

The funding gap is a known fact, with women-led startups receiving just 2.3% of venture capital funding in 2020.

Averages, of course, hide variance. The figures are widely different depending on the region, the size of the fund, and whether there is a woman pulling the investment trigger.

Based on my analysis of data from Crunchbase, the top 10 global venture firms by assets under management (AUM) have low double-digit investments in businesses founded or co-founded by a person that is not a straight, white male. None of the firms even have a diversity ratio above 20%.

The figures for the top 10 Japanese venture firms by AUM paint an even grimmer picture – the average diversity ratio is a paltry 1.64%.

Granted, there are significantly fewer diverse founders in Japan in absolute and relative terms. This may partly explain the Samantha vs. Samuel experience. But I think this goes to the heart of the chicken and egg problem that is investing in diversity.

How women get a check

I’m deliberately ignoring the risk-return profile of investing in diversity, especially in women-led companies. This deserves a deeper dive as the evidence overwhelmingly shows that businesses helmed by women achieve higher returns and exit earlier.