The problem: The Female Funding Gap
The allocation and distribution of capital has a huge effect on the way in which society (and particularly, gender-based hierarchy) is structured.
Despite behavioural progress being made across the developing world, the World Economic Forum estimates that it will take over 250 years for gender equality to be reflected, economically.
So, why is this the case? And what is this issue?
Well, today, only 2% of venture capital (VC) goes to female-led startups, even though gender diversity within businesses has been proven to generate greater return on investment (ROI).
This isn’t the only reason why women face a financial disadvantage. And investing in female founders alone isn’t enough.
Another issue to blame is the restrictive nature of financial products, processes and services. Lenders ask female founders for collateral before they grant them a loan – such as land or a house. This is a problem, more so for women, because these assets are traditionally owned by men, for social, cultural or legal reasons.
To this day, nearly 40% of economies limit women’s property rights. For example, in Chile the “husband administers joint property but also any private property of his wife unless she acquired it using financial means independent of his”.
There are many archaic ideologies that still govern policy today. We could go on for hours about how our patriarchal society came to be.
But for now, and to utilize our expertise within startups and corporate finance, we believe that making VC funding more accessible for women is an actionable route towards equality.
To achieve this, the finance sector (made up of Angels, VCs, and Private Equity firms, and so on) needs to bridge the gap by actively allocating more funds to female entrepreneurs.
This won’t be an overnight fix - the World Bank estimates the funding gap between men and women to be valued at £1.3 trillion.
That’s a big number. So let’s talk about how we can solve this.
Solution #1: Get more women on investor panels.
A sure-fire way to fuel funding for female founders is to place women within fund-awarding bodies. Adesuwa Okunbo Rhodes, founder of Aruwa Capital, highlights that the positive effects of diverse investor panels can and must trickle down. She argues that “more women succeeding as capital allocators means more women getting funded, more mentors, more torch-bearers, and more examples to follow.”
Solution #2: Implement female-focused schemes from the top down.
Two years ago, The German Finance Institution (DEG/KfW) implemented the 2X Challenge Scheme, to supercharge private sector funding for women-led businesses in innovative sectors. In 2020, DEG/KfW and other funding bodies invested $11.4bn as a result of the initiative – surpassing their target by 3x.
This roaring success uncovers the sheer demand and effectiveness of investing through a female-centered lens, not only for women in business, but also for meeting the unmet needs of female consumers.
Solution #3: Pioneer gender-inclusive alternatives within finance regulation.
The above two solutions are examples of action from inside the VC landscape. But the gender funding gap must also be addressed externally. Alternatives to gender-specific financial products and services are being introduced, giving hope to aspiring female entrepreneurs trying to get hold of a business loan.
In Ethiopia, CARE International has introduced a savings programme designed to act as collateral to make a case for a business loan – instead of the requirement of land or property that we mentioned earlier.
Solution #4: Join the conversation, make women’s voices heard.
This strategy falls onto us all. Everybody can play a role in making sure female founders are seen and heard. The best way to do this is to offer a platform where women can share their highs, lows, and challenges whilst navigating entrepreneurship.
That’s a big part of what we’re doing here at Vantage, within our Female Founder Growth Series. We want to echo the storytelling of our incredible cohort of female founders, and provide them with the tools to secure equal financial footing.
We chose the Female Founder Growth Series as our first programme because we believe that innovation and entrepreneurship is only exciting if it’s a true representation of society.
Addressing the gender funding gap - and the underrepresentation of female founders in general - can help to make things fairer financially. But also, overturn unconscious bias and outdated depictions of what it means to be female.
Following the success of our #FFGS - Spring Cohort, we'll be running an additional Autumn Cohort moving forwards! We're continually enriching our workshops and growing our member benefits package, making the Female Founder Growth Series more value-packed than ever before.
Applications for the Autumn Cohort of our Female Founder Growth Series go live on July 4th.
Save the date!