Two ways for companies to support women entrepreneurs
- Women founders currently face serious challenges in accessing venture capital and this lack of investment in women means that many opportunities are being missed.
- 2 main ideas emerged from our research: improving opportunities for women entrepreneurs through non-financial investments; develop the pool of competent women to be part of the investment teams.
SAP, together with efino, McKinsey & Co. and PwC Germany, has developed a concrete idea to close the opportunity gap for women entrepreneurs.
Enterprise venture capital (CVC) teams are responsible for 24% of all venture capital investments, accelerating hundreds of startups per year. Yet CVC teams potentially miss out on investment opportunities by not doing more to actively seek out and support women entrepreneurs with bankable projects. Most conversations about improving diversity in venture capital focus on generic steps any investor could take — like adopting standardized interview questionnaires, dashboards, and metrics — rather than companies in particular.
Women founders currently face serious challenges in accessing venture capital. In the US, all-female founding teams received just 1.9% of venture capital in the first three quarters of 2021, compared to 2.2% in 2020. In the EU, this figure was only than 0.7%, also compared to 2.2% in 2020. The COVID-19 pandemic is likely to have an impact on these trends, as on women in the workplace more broadly.
The lack of investment in women means that many opportunities are missed. Over a five-year period, for every dollar of venture capital invested, startups led or co-led by women generated 78 cents in revenue, compared to 31 cents for startups led solely by men. On average, companies with more diverse management teams report almost 20% higher revenue from innovation.
Unconscious bias against women entrepreneurs
Research on the gender gap in technology and venture capital reveals that many biased decisions are made unconsciously. For example, most venture capital funds have traditionally gone to all-male founding teams, meaning men feature more prominently than women in media coverage of IPOs and unicorn status. When considering potential investments, investors may therefore unconsciously assume that male entrepreneurs are more likely to enjoy positive results and higher returns.
This is less likely to happen if the investors themselves are women. However, according to research in 2019, only 3.4% assets under management were held by venture capital firms founded by women – another manifestation of the lack of opportunity.
Rather than trying to change individuals, research reveals that it is more effective to create an environment, initiatives, measures and guidelines that limit the possibility of such unconscious biases arising. This means investing in solutions that limit the influence of bias in decision-making and equipping decision makers with tools to notice and act on bias-prone contexts or processes.
Our project drew on broader research – including the Women and Public Policy program of the Harvard Kennedy School project Advancing Gender Equality in Venture Capital – and focused specifically on how the Corporate venture capital can bridge the opportunity gap. Two main ideas emerged from our interviews, surveys and expert workshops. A full list of identified actions is presented in the infographic below.
1. Improve opportunities for women entrepreneurs through non-financial investments
Access to income and the ability to scale quickly are the two key factors that allow entrepreneurs to succeed and access more funding to continue their growth. Beyond the financial investment, corporate venturing teams are uniquely positioned to help in two ways: accelerate the timeframe to a viable product and connect the startup to customers and suppliers.
If companies invest in entrepreneurs whose products complement their offerings, then they can partner in product development. Through their partner company, entrepreneurs have access to market intelligence, design, testing, and strategy resources that they couldn’t hire on their own. When the time is right, the company’s team can also help with drivers or beta testing.
Getting the right product is only part of the equation. The right price, the right packaging and the right go-to-market strategy are also essential. Businesses can help entrepreneurs model pricing and navigate the regulatory landscape.
When the product is ready to go to market, corporate teams can offer additional support by connecting the entrepreneur to their vast networks of customers and suppliers – at a minimum, providing introductions, offering advice for negotiations and helping to close deals. To maximize their impact, companies can:
- Include the entrepreneur’s products in his sales pieces;
- Encourage sales teams to sell the products of the entrepreneur;
- Conduct joint marketing and advertising campaigns;
- Feature success stories and testimonials for Contractor’s products through their communication and marketing channels;
- Buy from the contractor’s company and include it in its supplier diversity program;
- Approve the products of the entrepreneur; and
- Simplify access to become a supplier of your company and others.
Even from a mentoring perspective, companies can offer access to unique resources, effectively augmenting the entrepreneur’s staff by providing access to legal, financial, and business expertise as needed. Specifically, corporate teams can set up mentorship programs for women seeking funding; provide coaching on how to pitch and fundraise; and make presentations to internal and external advisors.
The World Economic Forum has been measuring gender gaps since 2006 in the annual Global Gender Gap Report.
The Global Gender Gap Report tracks progress in closing gender gaps at the national level. To turn this information into concrete actions and national progress, we have developed the Closing the Gender Gap Accelerators model for public-private collaboration.
These accelerators were convened in ten countries from three regions. Accelerators are established in Argentina, Chile, Colombia, Costa Rica, Dominican Republic and Panama in partnership with the Inter-American Development Bank in Latin America and the Caribbean, Egypt and Jordan in the Middle East and North Africa, and Kazakhstan in Central Asia.
All National Accelerators, as well as Knowledge Partner countries demonstrating global leadership in closing gender gaps, are part of a larger ecosystem, the Global Learning Network, which facilitates the exchange of ideas and knowledge. experiences via the Forum platform.
In 2019, Egypt became the first country in the Middle East and Africa to launch a Closing the Gender Gap Accelerator. While more women than men are now enrolled in university, women make up just over a third of professional and technical workers in Egypt. Women who are in the labor force are also less likely to be paid the same as their male colleagues for equivalent work or to rise to managerial positions.
In these countries, CEOs and Ministers work together over a three-year period on policies that help to further reduce the economic gender gaps in their countries. This includes extended parental leave, subsidized childcare, and removing unconscious bias in recruitment, retention, and promotion practices.
If you are a business in one of the Closing the Gender Gap Accelerator countries, you can join the local member base.
If you are a company or government in a country where we do not currently have a Closing the Gender Gap Accelerator, you can contact us to explore the possibilities of creating one.
2: Develop the pool of female entrepreneurs with the skills to be part of investment teams
- Incentivize more women to join investment teams as a career opportunity (e.g. internship, venture capital and rotation programs);
- Improve the experience of women who are already part of investment teams (e.g. mentoring, increased networking opportunities);
- Increase leadership opportunities for women in investment teams (eg, executive sponsorship, transparency on roles and opportunities, training).
According to a study by Atomico, 36% of venture capitalists have not introduced quantifiable diversity objectives. Our research found that this problem was even more prevalent among venture capitalists: 70% of venture capitalists who responded to our survey indicated that “diversity is important, but we do NOT have a Specific objectives”.
It is clear that much needs to be done to harness the potential of corporate venture capital to close the opportunity gap for women entrepreneurs.