Widening Financing Pathways for Women Entrepreneurs
Adequately financing women entrepreneurs’ is a necessary step to creating an equitable entrepreneurial ecosystem. Yet research clearly shows that women entrepreneurs face barriers to financing at the societal, organizational, and individual levels.
Experts in financing and innovators in the space, came together at the 2021 Women Entrepreneurship Conference—presented by the Women Entrepreneurship Knowledge Hub (WEKH) in collaboration with the Women’s Enterprise Organizations of Canada (WEOC)—to discuss the challenges women entrepreneurs face in accessing capital, and some creative models reimagining financing pathways.
Dr. Ellen Farrell of Saint Mary’s University shared eye-opening recent research findings on the experiences of women entrepreneurs seeking financing to open the session. Farrell has found significant evidence showing that women entrepreneurs are asked different questions and for different documentation by financiers. While men tend to be asked promotion-type questions that allow them to speak aspirationally, women tend to be asked prevention-type questions that focus on obstacles, putting them on the defensive from the start. Evidence from one study Farrell examined shows that startups asked prevention-based questions raised $2.3 million in funding, while founders asked promotion-based questions raised an average of $16.8 million. This in addition to the fact that many women entrepreneurs have been socialized to become “discouraged borrowers” who have internalized stereotypes about entrepreneurs and bias to avoid seeking financing altogether.
Farrell is optimistic that the financial system can and will change. She sees more and more discussion focused on changing the system as opposed to changing women, and less suggestions that amount to, “Why can’t women be more like men?” The business case for this change has never been so clear as well. New research shows that Venture Capital-supported women-led startups, when sufficiently fed, outperform male-led startups in terms of revenue generation and investment efficiency. Even still, funds invested into women-led startups is a fraction of that invested into male-led startups. Funds created for women and by women, like SheEO, are making considerable contributions and an exceptional case for change.
Spotlighting and highlighting the stories of successful women entrepreneurs with initiatives like WEKH’s See It. Be It. database is another important way to bring change to the financial system. These stories do not only show financiers the incredible potential of women entrepreneurs. They also empower other women and girls to see entrepreneurship as a potential path to success for themselves.
“One single rockstar female entrepreneur, with the right kind of positioning put behind her, could become the role model for thousands, hundreds of thousands, little girls,” Farrell explained.
Lessons from the Field
“We need to radically rethink things. We have had a business case for more than 10 years in the research showing how capital-efficient women entrepreneurs are,” explained Vicki Saunders at the start of a thoughtful panel discussion moderated by Shannon Pestun, Senior Advisor, Banking & Finance, WEKH.
Saunders is the Founder of SheEO, a “radically generous” global community of women dubbed Activators who contribute their own expertise and financial support to back majority women-owned ventures at 0% interest. Launched in Canada in 2015, the community has grown to include approximately 3,300 activators across Canada, and expanded to the US, Australia, New Zealand and the UK. “I’d like to see us radically rethink venture capital instead of just creating more venture capital for women and trying to fit it into the existing dialogue,” Saunders suggested.
While steps towards a more inclusive financial ecosystem are being made at mainstream institutions, Anita Cheng, Director of Member and Stakeholder Engagement at Vancity, recognized that progress is slow. However, there is more attention on the promise and potential of women entrepreneurs today than ever before, Cheng explained. Increasingly, she added, financiers are also coming to understand that the current model is excluding certain groups.
Founder of de Sedulous Women Leaders Ejibola Adetokunbo-Taiwo, worked at two of the top five Canadian banks prior to dedicating herself to supporting women entrepreneurs. The reason she left banking, Adetokunbo-Taiwo explained, was that she did not find herself supporting diverse women in her work, where many of her clients were men: “I did not see women like myself, my sisters, come to me for any sort of business advice.” Adetokunbo-Taiwo left with a deep curiosity about the experiences of women entrepreneurs, particularly women of colour and immigrant women, and a goal to promote inclusive entrepreneurship and share essential services, success stories, and funding opportunities—most recently through the Rise Up Pitch Competition.
Pestun had similar experiences while working in banking herself. “Our financial system in Canada was created in the 1800s and it was just never designed with women in mind and it is just no longer reflective of the world we live in,” Pestun said.
The Unity Women Entrepreneurs Program, offered by Vancity in collaboration with Women’s Enterprise Centre, has exposed some of the exclusionary practices of financing, Cheng explained. While interest in the program was initially high at the time of its launch in June 2020, organizers received less applications than expected. Listening closely to community feedback, Cheng and her team worked to make the program more accessible, in part by simplifying the application process and reconsidering eligibility criteria that had initially required businesses to be active for two years in order to qualify. Initial uptake on the revamped program has been promising.
“We need to challenge the system to understand how to be more inclusive, and we need to look at those communities that are underserved whether it is women, BIPOC people, LGBTQ2S individuals, or people with diverse abilities,” Cheng said.
In order to create the kind of system-wide change that will create more inclusive financing pathways for women entrepreneurs, a system-wide effort is required. “It takes a whole ecosystem to bring about the growth and economic development we need to see,” Adetokunbo-Taiwo explained. She added that the needs of small businesses and microbusinesses must be included in these efforts, as they hold much more potential than they are given credit for. It is therefore important to recognize the need and power of microloans and small grants. The overwhelming interest in the Rise Up Pitch Competition, which attracted more than 700 applications from Black women entrepreneurs for eight $10,000 prizes, shows this to be true.
Amanda Williams, Assistant Professor at Mount Royal University, finds that there is a desire to be innovative and to look for different solutions in the financial sector. She believes that it is critical to share success stories of innovative programs, like SheEO and Rise Up, as they underline what can be done. For those in the financial industry, it is also critical to be reflexive, Williams suggested, and to examine progress in addition to addressing internal bias. “It is being mindful of the questions we ask, and the criteria we set,” Williams explained.
Cathy Bennett, Founding and Co-Managing Partner at Sandpiper Ventures, and former Minister of Finance in Newfoundland and Labrador, stressed the need to have more women in decision-making roles as part of this change. This includes the government too. As Minister of Finance, Bennett quickly learned that the regulations governing the financial system, including those that can prove exclusionary to diverse women entrepreneurs, can change.
Bennett also believes that it is important to help women understand the power of their own financial decisions, and provide them with the support needed to invest in other women. This is especially true now as a great wealth transfer from the baby boomer generation is on the horizon, and poised to be landing largely in the hands of women. “If we are not able to, as a society, wrap ourselves around those women and help them understand what is out there to deploy their capital, then we have a massive missed opportunity,” Bennett said.
The panel concluded on an optimistic and energizing note. “We’re really in between worlds. This old way of doing things, the way we have done this in the past, this inequality that has left out so many people, is dying. Goodbye to the old system. There is a new one being birthed,” Saunders explained.
Watch the webinar on-demand to hear more from our expert speakers.
Join us at the Women Entrepreneurship Conference
The 2021 Women Entrepreneurship Conference returns on March 17 with “Ecosystem Progress and Challenges” and concludes on March 25 with a first look at the results of WEKH’s annual report for “The State of Women’s Entrepreneurship 2021.”