According to the EIB study there is a lack of women in decision-making roles on the investment side, which could further compound the finance gap.
Women-led businesses represent up to 38% of all registered small businesses worldwide, according to the European Investment Bank. So why are there still such hurdles for female entrepreneurs to access finance?
During an EIB event on 7 March devoted to the topic, Shiva Dustdar, head of innovation finance advisory, presented the key findings of a study requested by the European Commission.
There were several positive trends revealed in the study pertaining to investment in female entrepreneurs. In later stages, women-led companies were able both to attract more investment and outperform the market on median revenues. There was also an increase in venture capital funding for women-led companies.
“Geographical hotspots for female-owned companies are in Europe,” Dustdar added, with “Sweden disproportionately first”. France, Germany, Ireland and Spain round out the top 5 destinations when it comes to investment in women-driven companies.
Nevertheless, even with positive indicators, there still remains room for improvement. For example, of overall EU VC activity, the share of women-driven business climbed from 23% to 32% between 2010-2017, but the study showed that there was also a higher exit rate, implying the potential for additional capital reflows.
Shiva Dustdar, EIB head of innovation finance advisory, presented the key findings of the study during a 7 March event. Photo: EIB/Twitter
Evidence also suggests there is higher risk aversion of female-led companies. But, perhaps most revealing, is that there is a lack of women in decision-making roles on the investment side, which could further compound the finance gap.
From policy change to awareness raising
Based on the EIB study, there were four main recommendations provided for further consideration--awareness raising, advisory, financing and policy--suggestions which came up several times over the panel discussions on growth and creating opportunity for female entrepreneurs.
Case in point: Elise Badoy of Citigroup Global Markets presented some of the key conclusions of a recent Citi report which showed that fiscal policy can have a significant impact. Canada’s tax reforms, as well as its support for parenting initiatives, have allowed it to outpace the US, despite the two countries’ similarities in economies and culture.
The case was similar when it came to Sweden versus Italy, at opposite ends of the spectrum. The report states, “Sweden appears especially good (and Italy especially bad) at getting women into the workforce early on in their careers” and that, although the gap in the labour force participation rate “narrows significantly at higher education levels”, Italy still outperforms, which the study attributes likely due to structural weaknesses in its labour market.
Alexandra Dimitrijevic of S&P Global presented findings in her company’s report, “The (Financial) Future is Female”. Majorities of women in EU countries believe they are in charge of their financial well-being (the rate was highest in France at 70%). And although British women in particular have greater trust than their French or German counterparts when it came to dealing with financial institutions, “this doesn’t translate into actual investment.” Nevertheless, women had a greater tendency to invest in non-financial assets, housing, etc.
The downward trend of women in ICT is a “major policy concern” as well, for Lindsey Nefesh-Clarke of Women’s Worldwide Web (W4), who stated that “education is not necessarily sufficient to enter employment and become entrepreneurs.” W4 is a platform to empower women and girls through, among other things, access to e-mentoring and networking. Although she is encouraged by the G20 declaration and roadmap and the EU 2020 action plan, “we need to mainstream it. We’ve identified barriers, we have a host of solutions, but we need to close the gap”.
Sometimes, however, investment decisions boil down to simple personal affinities. Founder and CEO of Adelpha Group, Addie Pinkster, said she has seen female entrepreneurs make horrible investment decisions, merely because they got along better with one person over the other, even if the numbers indicated they shouldn’t trust the investor.
Pinkster is herself an entrepreneur, having gained experience in banking and hedge fund management before starting her own company. Around 80% of the companies she works with are women-led: “Looking for phenomenal opportunities led to female companies,” she said.