Investing in Diversity: The Power of Women-Led Ventures
Female-founded companies outperform male-founded ventures by a staggering 63%, and women-owned businesses are poised to inject a massive $5 trillion boost into the global economy, according to a 2022 Mastercard Index report. In Africa, women-owned businesses account for 40% of existing businesses, yet they receive only 1% of venture capital (VC) funding. Unsurprisingly, this has cost VCs a trillion-dollar opportunity, as they continue to undercut the potential of women-owned ventures. This however raises a critical question: why are investors overlooking a high-growth asset class? And what awaits the global economy when VCs bet big on women-owned ventures?
The Case for Women-Owned Ventures in Africa
A 2019 report from the Women and Public Policy Program at Harvard Kennedy School showed that investing in women-owned and women-led ventures is not only wise but also lucrative. The report debunked the myth that women-led ventures are unprofitable, revealing that they are the fastest-growing in the United States. Another report by the Boston Consulting Group confirmed the same, reporting that venture firms that back women-owned businesses experience higher positive performance; in addition, that VC firms with more female investing partners boast of up to 1.5% higher fund returns and 9.7% more profitable exits than all-male VC firms.
Even with these numbers, women-owned ventures are not getting the attention they deserve. A 2023 report by the African Private Equity and Venture Capital Association illustrated this reality, showing that of the $5.2 billion funding that African businesses received across 853 deals in 2022, only 26% of them had a female founder or a gender-diverse founding team (i.e., a founding team with at least one female), and together they received $950 million of the total funding, about 18%. Although this is an improvement compared to what female-founding and gender-diverse teams received in 2021, it is evident that women-owned ventures do not get as much funding as men-owned ventures.
Nonetheless, women-owned ventures face a dearth of support that extends beyond funding. These challenges range from limited access to markets to societal and cultural barriers that influence venture firms’ judgement about the capability of women entrepreneurs. Women-owned ventures are often viewed as high risk, and they are not readily assisted with access to support networks as their male counterparts are. Largely, women founders do not have access to the right network, and there has been little emphasis placed on addressing this.
If female entrepreneurs were leveraged as much as male entrepreneurs were, global GDP could experience an increase of up to 6%, with more jobs made available and more women being incentivized to create social impact businesses. Furthermore, if venture firms became intentional about building gender-diverse teams, they would be more inclined to invest in female-led companies, potentially gaining a 24% performance boost because of that decision.
Consider the case of the Nigerian healthcare technology company, LifeBank, founded by Temie Giwa Tubosun in 2016. Temie established LifeBank to improve access to essential medical supplies, particularly blood and oxygen. In 2016, Lifebank enrolled into an incubator program, and within two years, they had signed up 160+ hospitals and made +$90,000 in revenue; that is after receiving a seed funding of $200,000. As of the time of this writing, LifeBank has provided jobs for 142 people across 3 nationalities. Although its revenue is not disclosed publicly, there are indicators of a positive revenue trajectory and long-term profitability for the company.
This is only one of the many compelling cases for investing in women-owned businesses. LifeBank’s participation in an incubator program underscores the value of entrepreneurial ecosystems and support networks in nurturing women-owned startups; the latter proving critical in a company’s efforts to access funding.
When more women-owned ventures get access, as in the case of LifeBank, VCs will unlock the untapped potential of women-owned ventures and pave the way for a more equitable business landscape, which is crucial for women entrepreneurs who often face unique barriers to building sustainable businesses.
Harnessing the Power of Inclusive Economic Growth
Studies reveal a tendency for women to prioritize social impact alongside financial goals, and this can foster innovations that are targeted at underserved markets. Beyond profit, it can also lead to solutions that address critical societal needs.
The compelling case for investing in women-led businesses goes beyond social good; it’s a strategic move with significant financial rewards. By prioritizing diversity and inclusion, Trium, as a venture builder and other likeminded investors can effectively position itself at the forefront of a thriving market segment.
Indeed, women entrepreneurs can offer unique contributions that translate into competitive advantages for venture firms and the economy. By providing women entrepreneurs with the required resources, mentorship, and investment, their potential can be unlocked and thus catalyze the development of a vibrant entrepreneurial ecosystem in Nigeria and Africa at large.
At Trium, we are doing our part to leverage the transformational power of technology to digitize Africa’s business landscape through innovative ventures. We are uniquely positioned to lead this movement, shaping a more equitable and prosperous future for Africa. We are reshaping the way technology impacts different industries and rewarding our shareholders with big returns. Our commitment to promoting a culture of inclusion extends beyond investment. By fostering a team that values diverse perspectives, a culture that encourages all voices, Trium has become a magnet for talented individuals from all backgrounds, further strengthening its ability to identify and support high-potential women-led ventures.
Clearly, investing in women-led businesses is not just the right thing to do; it is good for business. As highlighted, these ventures boast impressive growth rates and profitability, yet they remain significantly underfunded. The narrative must be about unlocking a wave of innovation and social impact that can empower entire communities by allowing for adequate opportunities for these businesses and paving the way for a more equitable and flourishing future.
