The rise of women’s entrepreneurship

By Dr. Anino Emuwa, founder and managing director of Avandis Consulting, 

Introduction

Whilst the rate of women’s entrepreneurship is increasing, currently about 70% of men’s in the US for example, the access to finance picture is somewhat bleak with female founders receiving only 2.2% of VC funding in 2018. Yet venture capital is essential to enabling fast growing innovative start-ups to scale up. With tech sector studies showing that women- led tech companies to be highly successful with a 35% ROI, innovative women-founded business may be losing out of value creation. Women’s networks are beginning play a role with relation to this gap in several ways playing on women strengths as natural problem solvers.

Sharing information and knowledge

Entrepreneurship can be a lonely undertaking and networking communities of peers can alleviate this feeling providing support and information and being a place where female successful founders can be role models and women learn from each other. Women founders who have been raising funds can also help steer others to sources of funding that are more receptive to female founded business, and can share tips to help women develop skills in pitching.

Women can also find out about profitable entrepreneurial opportunities avoiding female entrepreneurship concentrating around sectors and business models which have limited growth potential. One of such trends is women tech founder groups

Women founders- case in point, Kylie Jenner with her eponymous Kylie Cosmetics and Rihanna creator Fenty Beauty achieved unicorn valuation status within a short period of time- are demonstrating that sectors that serve the needs of women can be incredibly lucrative when done well. Other examples of highly successful women led brands in fashion catering that have developed innovative business models specifically are Net-a-Porter, and Rent-the-Runway

Harnessing women’s ability to mobilize resources

As the female economy grows, women are flexing their economic muscles becoming investors and turning their focus on helping other women. Many women founders recall difficulties they had raising funds and are keen to help other women, collaborating to pool funds together to invest other women-led business. Examples are Bumble Funds in the US, Female Founders Funds, F7 set up by 7 Facebook executives, in Africa Rising Tide – by Yemi Keri and Ndidi Nwuneli successful female entrepreneurs themselves. An interesting development is Melinda Gates Pivotal Ventures investing in female VCs.

One of the obstacles to finance for women is lack of diversity amongst venture capitalists- only 7% of the investing partners in top firms are women with more than half having no women at all. Gates believes that big VC funds do not understand the women’s economy and are missing out on disruptive innovations that are women founder firm can offer. The idea is as VC begin to see the smaller firms who over index on female led startups it will attract more investment into women founded businesses.

Realising the opportunity to creating wealth whilst doing good

Diversity in leadership is increasingly recognized as an important contributor to firm performance as well as delivering positive social impact. Women investors are playing a strong role in impact investing with up to 33% of fund manager being female. It is though that women may find attractive the combination of purpose and profit.

Impact of Women’s Networks on Funding

In this way women’s networks are bringing about changes in the financing landscape for women-founded businesses, equipping women with skills, access to contacts, information, resources and opportunities as well as providing peer support. They are also creating funding opportunities for women-owned entrepreneurs through networks of female investors and working to closing the gender investing gap through innovative ways, for example Ellevest through a digital investment platform.

These developments in female networks of entrepreneurs and investors and drives to improve gender diversity in venture capitalist sector have started bring about awareness bring about the need for culture change in the start-up ecosystems with increasing demand for unconscious bias training for venture capitalists, for example. However, these actions need to be scaled up and mainstreamed. Decisions like Goldman Sach’s CEO David Soloman, recent announcement that investment bank would not take to the market firms that did not have at least one female, or minority, on the board- raising the requirement to two next year- are good signs that the market is beginning to take notice. The measure success will be when there will be no longer a need to identify female entrepreneurship as a category of founders.