Misleading stereotypes, suggest that women aren’t natural investors and they lack the gumption to do what comes naturally to men in investing. Recent data, however, completely debunks this myth and, more interestingly, suggests the opposite – that female investors regularly outperform men as fund managers and bring something new and valuable to the investment arena.
Additionally, research suggests that the gender makeup of investment teams and more critically, investment decision makers, severely impacts the how, where, what and in whom investment capital gets allocated. Women investors have been found to invest in more diverse industries and teams, whilst also taking a longer-term view – both of which lead to less volatile, more consistent performing investments as well as contribute a host of other benefits environmentally, socially and governance-wise.
This has significant implications for Africa, where, of the $1bn+that was raised by startups 2020, only 8% of the deals went to start-ups with a woman CEO, dismally representing only 2% of the money. With research suggesting that female funders are significantly more likely to invest in start-ups with female founders or CEOs, having more women as capital allocators could potentially offer female-led businesses in Africa the much needed leg-up and contribute to closing the gender gap in access to finance for women entrepreneurs.
The challenge then is to facilitate more women becoming investors, as expressed by Dr Vera Songwe, UN Under-Secretary General and Executive Secretary of ECA: “We want women to be on the supply side of money, not only on the demand side.” Women need to take their place at the investor table to leverage their unique strengths and influence to close the gender gap in access to finance for women entrepreneurs. If the gender gap in market participation of women closed by just 25% by 2025, that could mean an additional $5.3 trillion in global GDP. An astounding figure that could go a long way to building more sustainable economies.
The need is clear; we need more women investors. The question then is how to make this happen in an industry that’s been hard for women to break into and has provided women with fewer opportunities to build a track record. Most importantly, how do we make this happen in Africa?
As a starting point, here are four things that can be done to fast track this change:
Deliberately sponsoring promising female professionals in VC and PE firms
This needs to be done with the explicit aim of preparing them for leadership and investment making positions. A great example of this is Capital G, an independent growth fund by Alphabet that deliberately set out to build a more cultural diverse and collaborative environment from the get go. This paid off with them bringing on board the likes of Laela Sturdy, who despite her lack of experience in investing at the time, went on to become one of their top investors with 10 unicorns under her belt.
Accelerator programmes that focus on women fund managers
Entrepreneur accelerator programmes have been critical in building the pipelines of investible businesses in the African eco-system. This has been achieved by providing not only the technical expertise of business building and scaling but also bridging the softer yet equally important elements of investor-investee engagement such as having common language. The same could be applied to fast tracking the participation of women in investment by creating accelerators specifically for building pipeline of investible African women fund managers. UNECA recently launched such an accelerator via the African Women Investors Training Program, delivered by investment professionals from Africa or with significant experience on the continent. This is critical for not only building investment skills but ensuring that the training is steeped in relevant economic, social and cultural context.
Profile success stories
It’s important to highlight those who are already in the path and have already achieved in this space and build their profiles. It is said that young people can only aspire to be what they can see and thus showcasing role models who look like them and giving them high visibility is important for encouraging young women to aspire to be investors. Initiatives such as the Women in African Investments group are leading the way in creating a directory of women fund managers in Africa as well as providing a platform for engagement between key eco-system players such as development finance institutions, VCs, PEs and philanthropic funds.
Encouraging successful women entrepreneurs to become investors
Those who have successfully exited businesses and made some money have been found to in turn be good investors and spotters of the next big thing. This is evidenced by the likes of the famous “PayPal Mafia” a group of former PayPal employees and founders who have since, funded, founded and developed additional mega successful companies. In similar vein, women entrepreneurs who have walked the fundraising path should be encouraged to use this knowledge as well as their networks and capital to enter the field of investing. With experience of being on the other side of the table, they will have a valuable contribution to make towards supporting women entrepreneurs to thrive. Enygma Ventures, a VC fund that focuses on investing in women entrepreneurs in SADC, in one such example of a fund launched by former women entrepreneurs that exited successful businesses to become investors.
The more we recognise the shortfalls of the existing hierarchies that prevent women from entering and excelling in investing; and take steps to ensure opportunities are available, the more women we are likely to see succeeding in investment. And that can only be good news for African entrepreneurs and economies all round.
By Lelemba Phiri, PhD(c)
Operating Partner – Enygma Ventures