The Govt can't ignore this key barrier if it wants to genuinely boost Female Founders

The Govt can’t ignore this key barrier if it wants to genuinely boost Female Founders

Female Founders
The Federal Government’s Boosting Female Founders Initiative is a step in the right direction, but there’s one key problem: women have significantly lower access to capital than men. 

Laura Keily, a barrister and founder of legaltech Immediation, explains. 

Throughout August and September of this year, stakeholders in the startup and innovation ecosystem were invited to take part in a survey that would inform the design of the Boosting Female Founders (BFF) Initiative.

The program aims help remove the barriers to entry for women as founders and to aid in access to finance for startups founded by women.

Just 22.3% of Australian startups are founded by women according to Startup Muster’s latest report. It’s clear more needs to be done to support female founders.

As a female founder who has navigated the startup world, I can appreciate that the initiative most certainly is a step in the right direction.

But it is unlikely to succeed in making a significant difference if it does not aim to overcome a fundamental barrier: that women have significantly lower access to capital than their male counterparts for reasons that we are only just beginning to understand.

It is highly likely that the genesis of this disparity is unconscious bias and also the historical prevalence of men in finance and funding decision-making.

This is, of course, changing. However, in the meantime, we have further work to do in ensuring that female-led businesses operate on a level playing field.

The grant for equality

As part of the planned initiative, female founders will have access to $18 million of grants on a co-contribution basis, over three years from July 2020. It will be a competitive process, with the grants awarded based on merit, but leaning in favour of particularly innovative or rural-based projects.

The funding is welcome — and most certainly needed — but in its proposed form may create another barrier to entry. Co-contribution ensures the government is not simply bankrolling various startups and businesses, but requiring women to match the funding on a 50-50 basis — similar to the Accelerating Commercialisation Grant — doesn’t take into account the existing challenges.

Women have significantly lower access to capital.

According to data from PitchBook, female founders received 2.2% of $130 billion in VC funding in 2018.

Therefore, if they are unable to raise the matched funding, then the new initiative will be inaccessible to them. Asking female entrepreneurs to match the funding, on less initial available capital, will have an ongoing impact on the business as it aims to scale and grow.

Instead, we should be asking for a lower co-contribution ratio, of say 70:30 or 80:20, to provide female founders with the funding they need to grow their business in a way that levels the playing field. In this way, while still maintaining diligence from the taxpayer’s perspective, we can seek to redress the inherent barriers the community puts in place of women in business, albeit most likely inadvertently.

The earlier, the better

The first question many people may ask is: ‘Why do women get less funding and does it mean their business lacks merit?’ On any logical basis, the answer must be no.

But in case of any doubt, there is evidence the reason for the disparity in funding for female-founded businesses is not due to lack of merit.

report from BCG shows businesses founded by women ultimately deliver higher revenue — more than twice as much per dollar invested. This may be because, in order to generate revenue, a female entrepreneur has overcome a number of hurdles. Survival of the fittest founders in other words, or the best ideas. Or it may be that women have skills in business that are underestimated and not capitalised upon by society to its full advantage.

Either way, it is clear that businesses run by women are in safe hands — or at least, as safe as their male counterparts — so there is a problem if they can’t access the same level of seed funding because of their gender.

When it comes to accessing funding, the focus is usually on growing and scaling a business. But, for many, the difficult part is actually getting their idea off the ground.

In my experience, raising capital in the pre-seed and seed stage of business development can be difficult, although not impossible. At Immediation, we were successful in both accessing seed funding and obtaining an Accelerating Commercialisation Grant.

But when I look around, there are not many women I know who have founded companies that have done so. When I talk to the few other female founders in the legaltech space, I find many are self-funded. This is admirable — but I also wonder if it means women with fewer resources are being locked out of the startup landscape, with the Australian economy unable to get the benefit of potential innovation and revenue creation in the long run.

In order to maximise the impact and value of the BFF Initiative, there should be a special focus on the development of a seed capital program that is easier to access. While the Accelerating Commercialisation Grant is extremely beneficial, women accessing early capital in the seed stage may find it difficult to overcome the hurdles of matched funding.

The BFF Initiative is a step in the right direction in terms of enticing women to become active participants in the startup economy. That said, it’s crucial that the funding is shared in a way that directly addressed the barriers to entry and doesn’t simply become part of the problem. Along with mentorship and financial education, the focus should be on early-stage support. After all, the research shows that once established, the results of female-founded businesses speak for themselves.

This is an edited version of a post that first appeared on Smart Company and is republished here with permission.


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