New Research: Tracking Private Equity (Venture) and Debt Funds with a Gender Lens

As a long-time investor and connector in the gender lens investing space, I’m constantly asked about vehicles directing capital towards women, across all asset classes and sectors. What investment opportunities are there? Where are these investments targeted? What gaps still need to be filled?

Last year, I worked with Veris Wealth Partners to help answer some of those questions about public equity and debt funds. Our resulting landscape map, Project Rose, recorded public equity and debt funds and structured investment vehicles with a gender lens mandate. We uncovered 15 vehicles with a total market cap of over $600 million and a variety of definitions of ‘gender lens’. An update is coming this autumn and we’re excited by what we’re seeing in the growth of new funds or vehicles and assets under management. 

I’m now working with Wharton Social Impact Initiative (WSII), with input from Veris Wealth Partners, to launch Project Sage, a landscape of gender lens activity within private equity (venture) and debt funds and structured vehicles.

Our goal for this work is to establish a ‘point in time’ baseline and to begin building a gender lens investing evidence base around this asset class. This first scan will cover more than 60 funds from around the world. 

Structured funds aren’t right for every capital need, but they fill an important role in the ecosystem. The field has seen significant growth in the last five years. Yet, it’s not enough in the context of an enormous $260-$320 billion capital gap (as per World Bank and others) for women entrepreneurs at any given time—let alone the other businesses with a different, but equally positive, women effect as defined not by who the entrepreneur is, but by teams, customers, and value chains.

So much has already been written this year about the lack of capital for women entrepreneurs (check out this piece in Fortune but there are dozens of other articles that I’ve been tracking). But I’m interested in where capital is moving. And again, not just towards women entrepreneurs. 

In documenting the vehicles deliberately factoring gender into their investments, we’re offering a starting point for exploring opportunities.

In this first wave of analysis, I’ve been fascinated by how the different funds describe their gender lens commitment—or don’t mention the commitment at all.  Also intriguing are the variety of sector or thematic focus areas, and the diversity of approaches. But our work also highlights the lack of funds in particular geographies or categories, or from particular sources of capital.

I hope that this will be useful for investors, advisers, those helping to deploy capital and to raise capital, fund managers looking for co-investors, entrepreneurs, academia and more. 

What we’re about to publish is just a start. As we continue the landscape and analysis, we look forward to providing a deeper insight into this space.

This article was first published on 13.09.2017 by Suzanne Biegel for Wharton Social Impact Initiative

 

Here’s why climate and gender investors should collaborate

Environmental issues — that’s what I started with in impact investing 17 years ago — and they’re still as much a part of my investment thesis as gender equity. Yet even though I see the connections between gender and climate change/environment — between women and clean energy, and women and sustainable food, for example — I’ve often been split between them in terms of how I spend my time and resources.

Thankfully, Paul Hawken’s new book Drawdown provides the insights and data to achieve the greatest possible impact in both spheres. The book translates research from the world’s leading climate scientists and strategists into 100 solutions for reducing the amount of carbon in the atmosphere, ranked in order of overall impact and cost effectiveness

The gender lens

Hawken, one of the leading thinkers and actors in sustainability, has always felt that women and girls were essential to the solutions we need. Drawdown takes a fresh approach with data related to three factors. The solutions in the women and girls arena are deceptive as just two of them combined yield the single most effective strategy in the book.

One of the biggest issues around carbon is how many more people we’ll have on the planet and all the carrying costs (food, energy, transportation, etc.) that incurs. Closing the girls’ education gap in low and middle income countries would have a direct impact on when and how many children those girls go on to have, which has the potential to reduce the amount of CO2 in the atmosphere by 59.6 gigatons by 2050. A two-pronged strategy of girls’ education and family planning results in a reduction of 119.2 gigatons of CO2 by 2050 at an estimated cost of $44bn — compared with tackling refrigeration management, the standalone leading strategy, which yields a CO2 reduction of just under 90 gigatons by 2050 at a cost of $902billion. An additional strategy — providing equal access to resources for women smallholder farmers — has extraordinary ripple effects on climate, food security, and livelihoods.

A climate of collaboration

Very few people in the climate movement have made the connection between gender equality and girls’ access to education.

I’m excited by the opportunity to create new alliances between these two worlds — gender equity is not just a women’s issue and it’s not a siloed issue. Collaboration was a big part of the Women Effect pilot strategy; we know that different perspectives yield new ideas and insights. If we’re serious about tackling the most serious challenges facing humanity — including carbon levels and gender equity — we’ll need to pool resources and networks as much as we can.

Where are the investable opportunities?

Being with Paul Hawken and others in late July left me with several thoughts about the investable opportunities in these spaces:

- Where should we put investment capital and where can philanthropy or public sector spending be used, for both a positive girls and women impact and the most influence on climate change?

- What do we need to be investing in to change social norms so that people ‘get it’ about girls’ education and access to family planning, and value girls and women in a different way not just because of this but for so many reasons?

- In addition to education, there are opportunities in the four other areas identified in new work called the XX Factor, from the Center for High Impact Philanthropy (CHIP) at the University of Pennsylvania. These include health (including reproductive health), economic opportunity (including financial services and productive work) safety and security, and legal rights.

- Can I and other investors build a portfolio which brings direction from Drawdown to a girls and women investment thesis?

Towards an integrated investment portfolio

Drawdown could help investors build an integrated climate change and women and girls portfolio that makes the impact on both explicit. I love that Drawdown strategies also tie directly to the SDGs; there’s a growing movement to link investments to the SDGs, including work that i’m part of from Toniic.

It’s easy to get paralysed about how overwhelming these challenges are. Part of what’s inspiring about Drawdown is that it’s positive, realistic and none of the solutions feel insurmountable.

From an investor perspective, it’s really exciting to think about how I can hone my investment focus into the two areas I care most about. If not now, then when?

drawdown.org

Thinking differently about gender equality and finance

As part of a forthcoming panel at the Resnick Aspen Action Forum, i’ve been asked to think about how, as leaders, we can play our part in advancing gender equality. In a time of so much turbulence — economic, social, environmental, political, cultural, technological — there are opportunities for huge directional shifts, but we need a compass to keep us on course.

My particular focus and point of influence is finance and investment. I and many others believe that considering how we deploy capital can get us towards a gender equitable world. This is broader than increasing the visibility and quantity of women founders and entrepreneurs who get funded. We can also use our roles as investors and board members to shift things much more intentionally and strategically to reflect the social, environmental and gender equitable world we want to see, with positive financial outcomes.

I see three ‘re-sets’ required to help us get more capital flowing in the right direction.

Re-set 1: Awareness of and action on hidden biases impacting women entrepreneurs and co-founders beyond access to capital

Considering where women have been undercapitalised is certainly a huge starting point.

We know that many (but not all) have found it harder to access capital because of social, cultural, and regulatory or legal barriers. There are early signs of shifts here with new funds, new structures and new capital being allocated with a gender lens.

Beyond this, however, we know that access to technological innovation is not gender neutral. Various sources including Sharron McPherson at the Center for Disruptive Technology point out that guys are learning about using disruptive tech faster — a key driver of growth and competitive advantage. If women are less in the flow of information, does that create a competitive disadvantage? Similarly, new products and services contain the biases of their engineering and design teams — consider the gender of ‘helper’ bots Siri and Alexa. If tomorrow’s technology benefits one half of the population disproportionately, then we have a serious problem.

Re-set 2: A new framework for investing in gender equity beyond women entrepreneurs and co-founders

Most people are not going to be entrepreneurs, they’re going to work in companies, supply chains, or the gig economy, so there’s impact to be considered beyond the entrepreneur.

One of our learnings from the Women Effect community pilot was how many frames investors use in thinking about gender in addition to backing women founders/owners, such as:

  • Using capital to advance women’s leadership or economic participation overall
  • Seeing gender as a way of addressing broader social inequities and issues — Drawdown author Paul Hawken has identified the combo of girls’ education and family planning as the number one strategy for combating climate change
  • Investing in untapped ‘women’s markets’
  • Using gender as a factor of analysis in making better investment decisions across an entire portfolio — Criterion Institute created this frame and teaches it phenomenally

Some investors are vocal about paying attention to gender and some just want to do the work without discussion. Language varies. Framing varies. Where do you identify?

Re-set 3: Put men and boys in the picture

We need to speak consciously about where men and boys are in this picture. These are not “women’s issues.” Whether we’re talking about the shifting roles for men at work and home, men’s roles as allies or obstacles, how we’re educating boys, violence against women, men and boys are also negatively affected by traditional gender roles. When men want to become more active fathers and social stigma (from both sides) gets in the way, when men are expected to be the main earners in a household, how are we all perpetuating the status quo?

Uncertainty and massive opportunity

When any system shifts, it presents opportunity as well as uncertainty. Uncertainty makes people cling to the past and what felt stable, holding onto old beliefs and ways. This does not bode well for gender equality. We need a massive shift and we’ll only get this using the most powerful tools at our disposal. Investment can be one of those tools.

There is also a growing body of research that shows that the very best predictor of a state’s peacefulness is not its level of wealth, its level of democracy, or its ethno-religious identity; the best predictor of a state’s peacefulness is how well its women are treated.

As we’re looking at the great re-set this year, we need to make, and keep making, these connections between gender and everything else that matters — in climate change, food security, economic growth, political stability, and more.

Suzanne will be speaking on a panel discussing the Gender Re-set at the Resnick Aspen Action Forum on 28 July 2017.

 

Realizing the potential of women entrepreneurs in Africa

Gender lens investing is gaining traction with investors around the globe and Africa is no exception. In my role as senior gender lens investing advisor at the Wharton Social Impact Initiative, I got together with Isis Nyong’o Madison to reflect on discussions and lessons learned at Sankalp Africa Summit. The 2017 gathering of more than 1,000 investors, fund managers, entrepreneurs, and intermediaries focused on building inclusive economies. We thought we’d share some key takeaways for reducing barriers and improving the investment ecosystem.

Ina tent under the Nairobi sky, we recently gathered for engaging conversation on gender lens investing in early-stage and growth businesses in Africa. What are the barriers facing women entrepreneurs? What biases are women entrepreneurs subject to? What types of capital are available — or still needed?

At Sankalp Africa, four powerhouse African women led the discussion: Andia Chakava from New Faces New VoicesIsis Nyong’o Madison founder of Kenyan parenting platform MumsVillage and advisory firm Asphalt & InkWanjiru Kamau Rutenberg from AWARD and GAIA, and Makena Mworiafrom Kenya Women Holding.

Gender lens investing is most commonly defined as “the practice of investing for financial return while also considering the benefits to women” or gender equity.

Attendees shared differing views about what gender lens investing means in the African context, but the definition used by Kenya Women Holding — one of the leading African financial institutions with a reach of 800,000 female customers in Kenya — resonated most strongly: gender lens investing involves investing in workplace equity and decision making, funding the development of products and services focused on women and girls, and increasing women’s access to capital.

Over the course of several days, we heard from many voices about the specific challenges facing women entrepreneurs in Africa. Four key themes emerged:

Lack of capital

The supply side of capital–including banks, microfinance organizations, angel investors, among other options–still does not meet the varied needs of businesses with different shapes and sizes. For example, bank financing is structured for businesses with consistent cash flows with no grace periods — and many women entrepreneurs in Africa may not have these consistent cash flows. This gap is particularly evident for businesses that are past microfinance but not yet ready for venture capital or private equity. What will it take to increase investment in these areas?

Gender bias

The capital raising process itself can be biased against women. In conversations, we’ve heard that women entrepreneurs often need to meet higher standards in order to be considered worthy of investment and are frequently questioned about their abilities or commitment to running a business.

Competitions lowing allure

As their numbers increase, the competitions, fellowships and awards aimed at bringing more visibility to female entrepreneurs are losing their shine. Some entrepreneurs view these as a PR tool rather than a valuable exercise leading to the capital or connections that truly matter to growing businesses. Competitions that require pitching on a public stage, for example, are relatively new to the region and seen as unreasonably intimidating and artificial compared to one-on-one meetings with investors in a private setting.

Unfriendly networking norms

Networking is critical to business success across the world. But the how and when matter a lot and the group identified this as a pervasive barrier to accessing opportunities. The social norm of evening cocktail networking events was particularly frustrating for many women around the table, who strive to balance work, life, and family responsibilities with limited hours.

These challenges individually may seem surmountable, but collectively result in a large portion of women self selecting out of capital raising altogether. New research published by New Faces New Voices found that 62 percent of East African women entrepreneurs have never applied for a loan because they don’t think they meet funding requirements and the bank products are not aligned to the needs of their businesses. Given that business loans are the best understood form of financing locally, avoidance of loans is an indication that many African women entrepreneurs will not be able to scale their businesses to levels critical for Africa’s overall economic growth.

Given the gender-specific challenges that women entrepreneurs face, here are five suggestions to move forward:

1 — Increase the number of women investors

While the broader debate in Africa centers on deal flow quality versus capital availability, there is a significant pipeline of investable women-founded, women-led and women-focused businesses across sectors.

But to bring capital to these businesses, we need women investing in women as much as we need more men investing in women. It matters who has access to capital, who directs capital and how power structures are formed.

The impact of more women in decision-making positions at venture capital funds, private equity funds, banks and other funding institutions is multifold. First, it will help to counter the biases currently locking female founders out of formal funding and is likely to grow the number of female founded businesses.

Second, our conversation reflected the belief that “you can’t be what you can’t see.” When there are more senior women being seen as visible role models as investors, board members, and founders, a new self-reinforcing cycle can attract more women into the investment profession and encourages them to pursue formal funding routes.

2 — Address bias in the capital-raising process

Conscious and unconscious bias has an impact in the capital raising process. There’s a seemingly unshakeable perception from both local and global investors that businesses led by African women are microenterprises without the potential to scale, and thus the funding is approached from that lens. (Of course there are exceptions and there are some exceptional women founders getting funded by great investors. But we’re pointing out the larger persistent trend.)

Investors can work to overcome unconscious bias by collecting data around current practices, asking questions such as “how diverse is our network to build deal pipeline,” “how many jobs created by our investments are held by women,” and “can we see patterns of investing only in people who look like us?”. Low-cost, high-impact experiments to understand and address organizational biases can be found in What Works: Gender Equality by Design.

3 — Establish new networking norms

African women form networks around many areas of their lives — the use of group savings networks is one highly effective example. But there is an opportunity to build more connections among these existing and emerging online networks and to draw connections to regional and global networks.

Similar to the U.S.-based Dreamers & Doers, a new wave of women business networks forming online in Africa via WhatsApp and Facebook groups share opportunities and support each other. These organic online groups are ripe for establishing new norms and benefiting from networks in ways more reflective of women’s needs rather than men’s preferences.

4 — Build women collaboration spaces

Africa is participating in the global rise of co-working spaces, incubators and accelerators. Women-centered spaces appealed to entrepreneurs at Sankalp, primarily as an opportunity for meaningful networking and business collaboration designed around the needs of women and working mothers.

5 — Build the base of gender and sex-disaggregated data

We all agreed about the importance of having better data. There are significant but early efforts on gender specific data collection and analysis in business and financing, from World Bank and IFC, to an $80 million commitment by the Bill and Melinda Gates Foundation to address gender data gaps. This work needs to be better coordinated, more pervasive, and better amplified.

The discussion closed on a high note. A strong sense of optimism blended with acknowledgment that there’s a lot of work to be done to bring transformative change with real system-level shifts to realize the potential of women entrepreneurs.

For more blog posts and insights on building inclusive economies, browse the gender lens investing category on the WSII website:

Gender Lens Investing Archives - Social Impact
There are countless reasons to believe that bringing women fully into the global economy is the right thing to do…socialimpact.wharton.upenn.edu

Suzanne Biegel is Senior Gender Lens Investing Advisor at Wharton Social Impact Initiative, Investment Director for the SPRING Accelerator, an accelerator focused on accelerating businesses which have products and services that can improve the lives of adolescent girls, and founder of Catalyst at Large. She’s based in London.

Isis Nyong’o Madison is the founder of MumsVillage leading online platform for women in Kenya, and a Principal at Asphalt and Ink, a strategic advisory firm. She’s based in Nairobi.

This post originally appeared on the Wharton Social Impact Initiative blog on May 3, 2017.

Harry Specters – A Chocolate and Social Finance Love Story

This is a story of love, autism, chocolate, and innovative social finance.  Full disclosure – I’m an investor in this company and this is my first “chocolate bond” which I’m deliciously excited about.

Harry Specters make handcrafted chocolates, while giving hope and confidence to young people with autism through employment and free work experience placements.

Mona Shah, the founder, loves and has been working with chocolate for the past 15 years following a successful first career in the NHS mental health arena. (Personally, I think that there’s an obvious link between chocolate and mental health but she doesn’t lead with that.) She and Shaz, her co-founder and husband, have a son with autism who is the inspiration for the company. As parents, they understand the fears and anxieties that most parents and carers of people on the autism spectrum face on a daily basis. The worst fears are related to the future prospects of their loved ones, their independence and ability to lead a meaningful life.  So this is a chocolate story, an autism story, a love story (this wonderful couple and their love, and the love of their son.)

Lets talk about WHY they started this as a business rather than purely as a side passion. 85% of the working age people with autism in the UK are unemployed and 61% of them are desperate to work.  Mona wanted to create a business directly to tackle the challenge of employability of people with autism.  And since chocolate was her passion, and a category with real market demand and financial viability, she dove in to see what was possible to combine the two.  (Great ingredients – passion, commitment, real market demand, and a real social need with a real solution.)

Harry Specters started with a small grant in November 2012. To date, they have generated £210k revenue and have demonstrated that there is a real business here with solid cash flow.  They had on average 150% year-to-year growth in the past 2 years, and the main reason is that people love their chocolate, not only because they taste delicious (these are seriously some of the best chocolates in Britain—in my humble opinion) but also every bite  contributes to their mission. Harry Specters have won top awards for their chocolate, for their social cause and for their business concept.

During the first two years, Harry Specters created 12 paid employment opportunities and provided relief to 22 carers. 144 young people with learning difficulties contributed to the business.  Their team has recorded an increase in confidence and hope for their young people with autism. Currently, they also have 3 part-time employees and a waiting list of people looking for paid work.

Mona recently met with one mother of a young boy with autism who worked at Harry Specters. This mother had tears in her eyes when she said that Seb, her son, was so happy to receive the first paycheck of his life. Seb was excited about the money because he could then buy a gift for his brother’s 22nd birthday.

Collaborating with UnLtdClearlySo, and the other partners of the Big Venture Challengeprogramme, Harry Specters have just completed a successful capital raise, including 7 of our angels from Clearly Social Angels. They will use this capital to buy equipment, to support working capital, to move to a bigger facility, and to build a sales team.

ClearlySo worked with Harry Specters to develop an innovative investment instrument: Harry Specters Chocolate Bond. Investors invested in a note with a coupon of 8%. For the first 12 months, investors will receive a return in the form of chocolate, Harry Specters’ Chocolate Club. For the following 24 months, investors, in addition to principal repayments, can select whether they wish to receive their interest in cash or in chocolate, or a mix of both.

In the next 3 years, Harry Specters will have 13 young people with autism working full time. In five years, they have an ambition to take this number to 20. Additionally, they will improve confidence and hope of 128 young people with autism through free work experience. Finally, this will save the UK Government £40k/year/individual by transitioning these very differently able and committed workers away from public support and into viable employment.

I’m an investor with a strong gender lens. I'm the founder of a new initiative called Women Effect. I invested, in part, because Mona is the type of woman entrepreneur that I want to support. I also have a number of very special young people in my life who are on the autism spectrum, and I believe that employment that values their different abilities is absolutely critical, and this is a model for many businesses.  Finally, I do love chocolate. And I love doing investments like this in community with other values aligned investors – like my fellow angels in Clearly Social Angels here in the UK.

With Valentine’s Day coming up, think of this story of love, chocolate, autism, and using your capital for positive change. Harry Specters will ship anywhere in the UK.

(Written by Suzanne Biegel, with great help from Matias Wibowo from ClearlySoImages: Harry Specters

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Read full article Getting real on measurement – the role of the impact investor

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An investor offers a challenge to wealth managers

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