Venture Capital and the Gender Financing Gap: The Role of Accelerators
Oluchi Johnson-Achibiri has a background in Management Consulting and is…
In the past decade, entrepreneurship has emerged as a powerful tool to address the formidable challenges that limit emerging market economies’ ability to grow in a sustainable and inclusive fashion. Entrepreneurs and their startups are able to launch transformative innovations that address development gaps — in areas ranging from food security to extreme poverty — using solutions that are localized, context-appropriate, and scalable. For entrepreneurs to scale these solutions, they need outside resources. Research shows that young companies that access outside financing are able to grow up to 30% faster than those that do not.
However, it is difficult for entrepreneurs in emerging markets to access that critical capital — in part because of the stark inequality in how investment capital is allocated to founders. The gender-financing gap is a particularly clear example. Female-led startups, or those with at least one female founder, receive a disproportionately small percentage of the flow of global venture capital. Only 11% of seed funding capital in emerging markets goes to companies with a woman on their founding team, and the figures are even lower for later stage funding, despite the overwhelming evidence that investing in gender-diverse teams leads to stronger business outcomes. This ultimately limits the ability of innovative developmental solutions to grow.
Yet the reasons for this gender-financing gap in emerging markets are not well understood, nor are the means by which it can potentially be resolved. To address this, the International Finance Corporation (IFC), in collaboration with Women Entrepreneurs Finance Initiative (WeFi), Village Capital and the World Bank Gender Innovation Lab (GIL), set out to evaluate the role that accelerators — organizations that provide capacity-building support to early-stage startups to help them scale their companies and attract investment — can play in addressing the gender-financing gap.
To determine this, they turned their attention to two primary questions, with a specific focus on startups in emerging markets:
- What is the gender financing gap pre and post acceleration? What factors explain the gap?
- What strategies could accelerators employ to address the gender-financing gap?
This snapshot provides an overview of their key insights from the initial research.