Pathways to Gender Equity: How to Strategically Deploy More Capital

by Kelly Roberts-Robbins and Laurie Spengler

Strategically deploying more capital to gender-smart vehicles and investments serving both women and men entrepreneurs requires action from all actors in the ecosystem.  We have seen consistent inefficiencies arising when capital is deployed opportunistically rather than strategically. Moving up a level to consider the full range of investable opportunities from a strategic lens rather than deal by deal invites a more a holistic and effective approach that recognises – and values - women entrepreneurs’ diversity and varying capital requirements.  In many cases, a mismatch between the business-as-usual activities of suppliers of capital and the demand-driven needs of investees stands in the way of the accelerated action we need to build back better and more inclusively.

This mismatch has many sources: pattern recognition is real as investors are attracted to structures most familiar to them when the full opportunity set is increasingly diverse and innovative.  GPs and LPs often define women’s economic empowerment in different ways, and do not realise their specific approaches are not necessarily understood by or readily accessible  to other actors. There is a lack of clarity in market segmentation, the stage, and capital needs across the opportunity set of vehicles which can impact the portfolio breakdown of investors and create friction preventing deployment of capital across the full spectrum of opportunities. 

The bottom line is that investors can identify these barriers and act to resolve them. Here are some key pathways to action, identified during a recent GenderSmart and Women Entrepreneurs Finance Initiative (We-Fi) Programme technical workshop on increasing investments in women entrepreneurs through funds and structured vehicles.

1.   Stretch the breadth of your capital allocation: the approach should be AND not OR.

Deploying capital to gender-smart vehicles serving women entrepreneurs should not be a binary choice. There is plenty of opportunity within the investment landscape, and these opportunities are intended to fulfil a variety of addressable market needs. Therefore, investors’ approach should not be exclusionary. Even if an investor cannot shift all of its allocated capital it is certainly possible to shift some part of the portfolio. Think about ways to invest in additional vehicles to cover the full opportunity set. Let’s ask ourselves: through our portfolio allocation, are we investing in Black Female entrepreneurs? Are we investing in Muslim entrepreneurs? And what about the LGBTQI+ entrepreneurs or marginalised entrepreneurs? Who are we capturing, and which needs are we addressing?

Strategically deploying more of a particular portfolio (e.g. asset class, geographic or thematic allocation) to women entrepreneurs is about serving all women entrepreneurs.

2.  Utilise the full spectrum of capital and avoid the cluster effect.

As a community, we need to consistently challenge ourselves to be transparent about what we are trying to achieve. Being gender-smart also requires going outside of our comfort zones. Familiar structures do not necessarily address the full opportunity set; familiar capital tools are not always fit for all types of opportunities. Let’s ask ourselves: are we allocating capital to all sorts of funds? Are our portfolios mainly comprised of low-hanging fruit, the easier-to-underwrite deals? When investing in funds, does our mix of capital consider at last some deep impact funds? Do the terms and conditions of our capital allow the funds to best achieve their mission?

Strategically deploying more capital to women entrepreneurs is about tapping and considering the full spectrum of capital to find the right mix of capital solutions.

3.  Shorten the time to market. Be an early supporter.

Projections from the World Economic Forum state that it could take 99.5 years to close the global gender gap. Achieving gender equity certainly will not happen overnight, but together as a community, we can shorten the period to close this gap. In day-to-day deal making, that means shortening the time to market for new funds and fund designs.

One particular area where greater support is needed is around shortening the time to market of gender-smart vehicles at inception. The good news is that this is precisely where established investors can play a meaningful role. Anchor investors can provide early support and allow for larger ticket sizes. Investors – even those who do not take anchor investor positions – can stand up TA side-cars, provide first-loss capital, or fund specific early fund design activities that occur before the main fund raise such as gender lens thesis development, impact management frameworks, and gender action plan development. Another approach could be to bring to life more evergreen facilities and then focus on collaboration and design to build and reshape them as they grow.

Strategically deploying more capital to women entrepreneurs is about increasing the opportunity set and bolstering vehicles’ value proposition at inception.  Scale (or quantity), as well as quality, matters, which means time to market is a critical barrier.

The road to gender equity will be travelled faster if we combine our strengths, include all stakeholders at the table – particularly leaders throughout decision making processes - and keep the conversation going.

So, which pathways will you follow?

Image by Stefan Dahl, Canva