Last year, business leaders could be heard repeating a version of this phrase: “We have seen 10 years of transformation or growth in just 10 months.” Unfortunately, the same cannot be said for women’s experiences within business. Instead, we have seen the opposite.
The pandemic’s negative impact on women has been immense. Not only have women borne the brunt of job losses, but the recession wiped out two decades of economic progress for single mothers. Where I work in the tech industry, the amount of investment that went to female founders dropped to a three-year low. And globally, when it comes to the professional management of capital, the female-to-male gap has become so extreme that researchers at Citywire estimate that it will take two centuries for female fund managers to close the gap to their male counterparts.
That being said, the harsh metaphorical waves of COVID crashed up against a rock-hard trend from the past decade: the rising wealth of women. Pre-pandemic, a CIBC report said that 41 percent of Canadian women controlled $2.2 trillion of financial assets, and projected an increase to nearly $4 trillion by 2028. Globally, in 2020, women were expected to hold $91 trillion, or 32 percent of all wealth, up from $64 trillion in 2015. With our sights on women’s economic equality, we must remember we are not starting from scratch; we are building on progress.
Since the pandemic showed people and organizations that we are capable of rapid change when the situation calls for it, the question is: Can we harness the current social environment to move the needle? Can we action the right ideas to turn women’s increasing wealth into a foundation for more equitable economic growth and innovation? Can we build resilience into women’s economic power by making changes at every stage of the entrepreneurial journey?
Funding for women: A work in progress
The unique needs of women are often missed in business financing schemes. Nearly 98 percent of Canada’s employer businesses are small businesses and startups which employ millions of people and are fundamental to economic growth. However, less than 16 percent of them are majority owned by women, who are less likely to see and receive financing than men, according to the Women Entrepreneurship Knowledge Hub.
Sixty-one percent of women recently surveyed by the Women’s Enterprise Centre (WEC) say current funding models do not fit their needs. More than half find applying for funding to be difficult, and 28 percent have not applied because they feel they would not qualify. Although banks and governments are attempting to develop funding programs for women, there is work to be done in aligning them to serve women in the ways they want and need.
Venture capital and its issues
Private capital is another option for entrepreneurs. In the tech industry where I am active, venture capital (VC) investors have a crucial role to play in the trajectory of companies. Yes, we write cheques, but we also support entrepreneurs through introductions, advising and problem-solving. But VC as an industry, and as a growth tool for entrepreneurs, has massive issues to fix, too.
Some reports indicate that female entrepreneurs are on the receiving end of just 4 percent of venture capital dollars. This is not surprising, however, once you consider that less than 10 percent of managing partners at Canadian funds are women. When investors (who are mostly men) invest in people they can relate to (which evidence says they do), it is no wonder women’s share of dollars is so small. But if there are so few female investors, we must question how we can expect to move the dial when it comes to equity in funding.
We can’t. Which brings us to a crucial point: If we do not want to leave massive market opportunities on the table and stifle economic growth, we must urgently take steps to increase the number of women investors and limited partners (the people funding the funders.)
To build a foundation for more inclusive growth, we need to increase diversity at every level of the investment stack – funding entrepreneurs; elevating women to decision-making roles at financing organizations; and critically, expanding the pool of female investors across all categories – professionals and high-net worth individuals – engaging directly in the innovation economy.
Putting the building blocks in place
Before COVID, women’s wealth was on track to increase 41 percent over the past five years. Just imagine the effect on the economy if we took steps to rectify imbalances in funding and support for women and other underrepresented communities. Fortunately, there are initiatives underway with the potential to create the sustained change we need.
When it comes to entrepreneurship, organizations like the WEC and The Forum are dedicated to the education and support of self-identifying women entrepreneurs in British Columbia and Canada.
When it comes to funding, a successful template is the Business Development Bank of Canada’s Women in Technology Venture Fund, which is dedicated to investing in women-led companies. In addition, groups like Backbone Angels, which is focused on BIPOC (black, Indigenous and people of colour), women and non-binary founders, is primed to make an immediate impact. A practical initiative in Western Canada is Women’s Equity Lab, which teaches women to become angel investors. Participants learn how to invest, discuss deal opportunities and pool funds to back early-stage startups. It is a framework that empowers women to shift the systemic imbalance of men being the dominant investors and shareholders in early-stage companies. It is a model that should be replicated across Canada and around the world.
At my firm where 40 percent of employees and portfolio company founders are women, we believe that diversity is key to long-term success and that without diversified funding options that serve the needs of women and underrepresented groups, the world will miss out on growing great companies because we will be overlooking entire cohorts of entrepreneurs and ideas.
COVID has demonstrated humanity’s capacity for making dramatic change happen overnight. It provides hope that in our goal to empower women to create sustainable economic growth and innovation that serves us all, we can be just as swift.
Maria Pacella, CFA, is the Managing Partner at Pender Ventures and has over 20 years of investing and operational experience in emerging growth companies with a focus on technology businesses.