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Funding Female-Led Businesses: The Way Forward

Female entrepreneurs continue to make strides globally. So far this year, at least a dozen new female-founded unicorn ventures valued at $1 billion or more- have emerged. The latest, Incredible Health, was co-founded by Dr Iman Abuzeid  CEO of the health tech start-up.

She follows in the stead of Eynat Guez who heads Papaya Global, an HR platform;  Market Kurl, a fast-growing online grocer in South Korea founded by Sophie Kim; Jessica Alba’s The Honest Company;  Cristina Junqueira, co-founder of  Brazil’s nubank, and Falguni Nayar’s beauty brand Nykaa in India.  Female founders outperform, exiting quicker and at a higher valuation, according to Pitchbook’s “All in Female Founder in the US VC Ecosystem”.

Yet behind this seemingly glowing picture lies a bleaker reality: whilst VC funding has seen a surge in recent years, in the US for example, female founders raised a dismal 2,3% of total venture funding and in the UK a paltry 1.1% in Europe according to a Pitch Book report. Not only do female-founded businesses receive less funding in total, but even more worrying, they secured on average less than half the amount received by their male peers ($935,000 compared with $ 2.1million). This is despite the fact that for every dollar of funding female founders generated twice as much as male-founded firms (BCG).

With venture capital and its accompanying support vital to power high-growth start-ups, it is perhaps no surprise that female-founded businesses end up being smaller than those of their male counterparts. Tackling this gender VC funding gap is recognised as essential not only to the growth of female-founded businesses but also to redress the gender wealth gap and to create more employment opportunities for women, as female-led firms are known to hire 25% more women.

But here is a bright spot on the horizon- the rise of the female investor. Helping to bridge this funding gap is a new group of angel investors, and venture capitalists- particularly General Partners (GPs) and female-led gender-lens funds. This trend which began in the last decade has accelerated in recent years.  One of the first and probably the most well-known is the Female Founders Fund (FFF), founded in 2014 by Anne Duggal, which has focused on funding tech-related start-ups. The influence of FFF on the funding ecosystem for women has been phenomenal by shedding light on the investable opportunities that female founders represent.  In Europe, Voulez Capital founded by Anya Navidski, was the first VC fund for women lead ventures.

On an equally positive note is the increasing number of female GPs which has risen to 15.4% of the total in 2021, up from 12% in 2019. This is important as studies show that female founders’ chances of securing investment rise when there are women investors present during a pitch.   The women-investing-in-women trend has benefitted in recent times from public figures entering into the gender lens funding arena. Notable examples are Melinda Gates through her Pivotal Ventures, which aims to close the funding gap for female founders, and Serena Williams who recently announced she would shortly retire from tennis and dedicate more time to her Serena Ventures which raised $111million in  March to invest in minority and female-led ventures.  One highly influential US female investor is Ann Griffin of G9 Ventures which she set up in 2017 who is searching for finance for the next women-led venture with unicorn potential- she has invested in Goop, Bumble, and Spanx and has a reputation for also leveraging her high-powered connections to help entrepreneurs find investors and mentorship.

Women are also creating an impact in the angel investor space, traditionally the remit of men. With women now controlling 32% of the world’s wealth, we have seen an increased interest in becoming investors. Amanda Robson, principal at Cowboy ventures- all of whose investments as of August 2022 this year have been to female founders- has set out to grow a network for female and non-binary investors helping to educate and starting at smaller check sizes as low as $5,000 where normally this could be as high as $150,000. Other innovative female-run funding models include The Billion Dollar Fund for Women, and following its success Beyond the Billion, both co-founded by Shelly Porges and Sarah Chen, as well as Vicki Saunders’  SheO, a global initiative to transform funding for female entrepreneurs.

Other notable developments are in the impact space, public sector and international development finance institutions reflecting the recognition of the inclusive role female entrepreneurship can bring in terms of social impact and development.  Notable global initiatives include the We-Fi, the Women Entrepreneurs Finance Initiative, a global partnership hosted by the World Bank Group mobilising financing and non-financial support for women-led/owned businesses in developing countries which has so far allocated close to US$250 million to tackle challenges women entrepreneurs face in developing countries.

Project Sage 4.0, by Wharton’s Social Impact Initiative, co-authored by Suzanne Biegel, co-founder of Gender Smart, catalogues over 200 funds globally that invest or finance ventures globally using a gender lens. As of June 30th last year, the funds in the study had raised $6bn in both debt and equity with venture capital providing over 60% of the total funds. Though not exhaustive, this directory in its fourth iteration provides a valuable resource to female founders and a measure of the growth of these funds.

Female investors and female-led funds are leading the way in providing capital to women founders.  Their success will go beyond the amount of investment they make to changing the culture and catalyzing mainstream capital providers towards gender-balanced investment. In recent years we have begun to see some of the most conservative capital providers in the investment banking sector specifically target female entrepreneurship. For example, Goldman Sachs’ 10,000 women, in partnership with IFC provides female entrepreneurs around the world with financial as well as business management resources. In the wake of the racial justice movement in the US in 2021, it sparked its 1,000,000 Black Women programme which includes funding for female-led businesses.

On the whole, progress is being made with female investors leading the way but a lot more concerted action is needed to achieve gender balance in funding entrepreneurship.



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