Are women left with the short end of the stick when it comes to financing their startups?
Mar 8, 2016
Throughout the world, the idea is gradually catching hold that including women in businesses and in positions of leadership results in more creative and more complementary work teams. The belief is that women’s vision helps businesses go further, and making them participants in the world of work creates better managed and more successful businesses. The result is the so-called “gender dividend.”
Why then aren’t more women in Latin America and the Caribbean succeeding as entrepreneurs at the same rate as their male peers? Is it because they aren’t given equal access to financing, and if so, why not, and how can we fix that?
Networks. Women’s networks tend to be smaller than those of men, and those networks tend to be composed of family and friends, rather than outsiders. This makes it difficult to get strategic advice and connections to investors.
Sectors. There are still many more men than women who found cutting-edge technological enterprises. In this sector, women are more present as consumers, but their presence as professionals is significantly lower.
In Latin America and the Caribbean, this sectoral polarization is even more accentuated. A 2014 study, WeGrow: Liberating the Growth Potential of Women Entrepreneurs in Latin America and the Caribbean, which examines the opportunities and challenges of female and male entrepreneurs in the region, finds that technology sectors (computers, Internet, software) are selected by 40 percent of men but only 6 percent of women. In contrast, 40 percent of women opt for careers in services, retail, or food and beverages, sectors that attract only 11 percent of men. The study finds that women tend to prefer working in “lifestyle” businesses, which perhaps do not have as many prospects for high growth and globalization.
Cultural misconceptions and investors’ misunderstandings hinder women entrepreneurs
Women are dogged by misconceptions in business. There is a prevailing notion that they are more risk-averse by nature—a notion that I find patently absurd. This fact, plus some deeply-rooted and still common misconceptions that women’s role is far from the business world, and even farther from high-growth businesses, don’t help position women entrepreneurs as relevant players in the business world. The irony is that women are more likely to start businesses they are passionate about, and businesses born of true passion are more likely to grow and succeed.
There also is a lack of understanding about the differences between men and women and how they relate. While men tend to be more transactional, women tend to be more compartmental: business is business, and other activities such as leisure or sports, are … leisure or sports. And that can work against women when they are trying to grow their networks, or when they are pitching to an investor who is accustomed to hear most pitches coming from men. Let’s face it, there are few women investors, so most investors are men, listening to pitches from other men!
Since banks finance less than 20 percent of women’s business needs, women often lack alternative sources of funding beyond their immediate networks of family and friends.
How can we right this wrong?
The good news is that, on the other side of these challenges, an increasing number of programs and business accelerators in Latin America and the Caribbean are promoting women’s entrepreneurship, especially in the area of technology. This is cause for celebration. There are many concrete examples that make us optimistic. To name two within the last few years:
• NXTPLabs invested in Zolvers, an online startup founded by Cecilia Retegui in Argentina, which connects people offering domestic services with possible clients. Zolvers has expanded to four countries, thanks to its sharing-economy model that uses “big data” to connect homes with people willing to do specific domestic chores.
• Entrepreneur Sonia Hess, founder of Dudalina, one of the largest textile firms in Brazil, received investments from two major venture capital funds: Warburg Pincus and Advent.
There are a few ways to address this lack of access by women to potential investors. One way is to support business accelerators with diversified management teams. They will be more inclined to be gender blind and to support diversified entrepreneurial teams in their portfolio.
A second way is to encourage already successful businesswomen to become angel investors. Women tend to focus on investing in more diversified teams, so, as a consequence, more women entrepreneurs will benefit.
Third, we need to keep sharing the positive results that investors like Kevin O’Leary have had from investing in women. O’Leary said in an interview with Forbes in September 2015 that 55 percent of the 20 companies in his investment portfolio have women CEOs. There are many of these types of investors, and we need to get them to talk.
Imagine the future …
There are sufficient reasons to be optimistic about the evolution of the role of women in business in Latin America and the Caribbean. In the next five to ten years, we will begin to see that some women entrepreneurs are completing the virtuous circle of many male entrepreneurs: they start companies that grow, they sell them, they start others, they sell them, and then—when they have accumulated a lot of capital—they begin to give back to the community, acting as mentors and angel investors.
Today, many women have broad networks of contacts and participate in acceleration programs—such as 500 Startups, Agora Partnerships, NXTPLabs, the S Factory Chile, or Wayra. Some women entrepreneurs with the highest growth potential are designated as such by Endeavor, a global nonprofit that supports high-impact entrepreneurs around the world, which enables them to obtain investment more easily.
For all of these reasons, we can definitely imagine a future with a more equitable entrepreneurial ecosystem, where there are many success stories and not such a dearth of specific initiatives for women.
I invite you to familiarize yourself with WeXchange, a platform that connects high-growth women entrepreneurs from Latin American and the Caribbean with mentors and investors.
A version of this post also appeared on Agora Partnership’s Accelerate Women Now magazine
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