Globally, just 10 percent of venture capital investment was made in women-led businesses in 2017. While that may seem low, EU countries, and Ireland in particular, display even more surprising figures, especially in important startup sectors such as tech. In the first quarter of 2018, €310 million were privately invested in tech and biotech businesses in Ireland. Of that, just €2.3 million, or 0.7 per cent, went to businesses that were founded or cofounded by women. Moreover, the typical investment that women were able to obtain was just one eighth the size of what male entrepreneurs could expect.
Despite Irish and broader EU programs designed to promote female entrepreneurship, female-led Irish startups are being left behind in terms of access to venture capital. While investment is remarkably low in Ireland, this issue is reflected all over the EU and much of the world. The difficulties faced by women entrepreneurs are especially remarkable considering that research by Babson College, involving 6,793 US companies over 2 years, has found that these businesses achieve valuations that are over 50 per cent higher on average than those of exclusively male-led businesses.
Existing programmes are inadequate
Governments, including the Irish government, have taken steps to promote female entrepreneurship, but few are devoting significant resources, or pursuing the strategies that have already proven successful. Furthermore, state-level bodies in Ireland aren’t providing any support in terms of helping women to find or access investment. The European Commission and Enterprise Europe Network resource document “Female Entrepreneurship in Ireland”, for example, provides a small selection of networking and mentoring resources, but then goes on to list traditional bank loans as the only funding option. In regard to the Irish government, the Department of Business, Enterprise, and Innovation website directs readers to WeGate, an EU portal for women entrepreneurs that, as of the time of writing this article, contains no investment or other funding resources of any kind for Irish businesses.
Irish VC investors don’t cater to women
While Enterprise Ireland provides a small amount of public investment specifically for women entrepreneurs, the fund is spread thin and the amounts issued are miniscule compared to typical venture capital investments. Further, no private venture capital funds in Ireland cater specifically to women, or make a serious and explicit effort to promote female entrepreneurship.
Australia and the US have solutions
Of the world’s top 10 cities with proportionally the most female entrepreneurs, the top 4 are all located in the US. Australia excels more broadly on a national level, with 26 per cent of its venture capital investment last year going to women, according to the Australian Financial Review. The reason for their relative success is evident in the environments that these businesses find themselves operating in when it comes to finding investment.
The rise of female investors
The vast majority of Irish venture capital funds are led entirely by men. This is true across the board, but particularly in countries like Ireland, where the imbalance is the most extreme. In the EU, women only make up 5 percent of managing partners. Australia, on the other hand, is host to numerous female-led venture capital firms, and a much larger portion of investment firms that at least have some female venture partners.
This is critically important, even beyond managing unconscious sexism. A team of all-male decision makers might entirely fail to see the potential in a brilliant startup. For example, American entrepreneur Sara Blakely, the much acclaimed founder of Spanx, initially couldn’t find a hosiery mill to produce her revolutionary product, because these were all run by men, who weren’t consumers in their own markets. It wasn’t until the daughters of the owner of one of the businesses got their hands on a sample that Blakely could go into business.
Women’s venture funds
Another solution has also been developed to deliver results more quickly, often by women investors frustrated with the pace of progress on funding women-owned businesses. Concentrated in the US, and spreading all over the world, are venture capital funds that exclusively fund businesses with at least one female founder. These are seeking to address the imbalance in venture capital investment directly. While these funds are typically not very large, they provide investment to a relatively large number of businesses that would otherwise be ignored. As it turns out, this is also a very interesting and lucrative business model.
Female-led startups have been shown to produce higher revenue with smaller initial investments than the male dominated status quo. This, in large part, may be precisely because only a relatively small proportion of these businesses receive investment. As a result, it’s easier to find very promising startups that no one else is already funding. In light of this, Ireland may have a lot to gain by encouraging greater investment in its female-led startups.