Funding bias against female entrepreneurs still alive and unwell

London — Leading investors may well have been tempted by a start-up prospectus offering a slice of a long-neglected sector that promises vast growth, low risks and healthy returns.

The catch?

“Unfounded Ltd” was not a real start-up, but a company invented to throw light on the sorry state of investment in female entrepreneurs and the barriers women face to win funding.

The pitch was sent to 100 global venture capitalists by non-profit group H&M Foundation in an initiative launched on Thursday to encourage funders to back women in business.

“Unfounded Ltd is a tool to break the barriers that women entrepreneurs face in access to finance,” said Diana Amini, global manager of the H&M Foundation, founded by the owners of the Swedish fashion chain. “By using the language of investors, we want to reach the individuals who make the judgment calls and write the cheques.”

Women-owned companies perform better on average than those run by men, said the report, but often miss out on the money they need to grow. Companies founded by women won 3% of venture capital funding in the US last year, according to data cited by H&M.

A recent UN report found 80% of female-owned firms in emerging markets struggle to get credit.

Surmounting sexism to invest more in women could boost the global economy by up to $5-trillion — about the size of Japan’s economy, the Boston Consulting Group said last year.

The report offers advice for investors and other financial businesses, which, it said are “uniquely positioned” to drive change — and also stand to benefit from businesses neglected by rivals. Key steps include training men to shed bias, hiring more women to make funding decisions, and making investors aware that female pitches may be less bombastic — and much more realistic.

Funding women can also create a “domino effect” beyond work, said Reintje van Haeringen of humanitarian organisation CARE, which works with the H&M Foundation to help female entrepreneurs.

“Women are often seen to have a modest role in their families’ decision-making and the business gives them the self-confidence and opportunity to grow,” she told the Thomson Reuters Foundation. “With the increased income and that extra power, they start transforming their whole communities.” 

Thomson Reuters Foundation