Investing in women entrepreneurs. The best bet.
Women in Mexico and Latin America face a gender-based disadvantage in their professional development. It is well known that for every 100 pesos a man receives in a job, a woman, under equal circumstances, receives about 25 to 50 percent less, simply because she is a woman.
Unfortunately, the activity of entrepreneurship does not escape from this unfortunate reality. Even when derived from hard data analysis, it seems that investing in projects of companies founded or co-founded by women, not only has less risk but also has more chances of success; the story reflects that a company is less likely to survive if it is led by women. This is mainly due to the lack of access to financing and capital, but also to the lack of specialized incubator programs, accelerators, government programs and other incentives from ecosystem actors that would allow more women to become entrepreneurs.
Boston Consulting Group, in alliance with Mass Challenge (in my view one of the 2 or 3 best accelerators in the world) recently documented the marked disparity that those companies founded or co-founded by women face when raising capital or seeking access to financing. For every dollar invested in companies founded by men, those led by women received only 44 cents, a gap of more than 55 percent attributable to gender alone. The interesting thing about the analysis is that it also reflects how that investment translated into results and whether, indeed, even with that disadvantage, men generated almost 10 percent fewer average sales than women over a five-year period.
Given these contrasting hard data, it seems that the big challenge to overcome is cultural. Private equity funds and investors, in general, must eradicate from our limited vision that gender represents a disadvantage or an obstacle to company profitability. Let us understand that women not only may have the same or better technical knowledge than men, but they naturally have a much greater capacity for resilience, as well as better managerial and administrative skills and a greater ability to organize themselves or follow up on a plan of action in a timely manner.
If women and men around the world participated equally as entrepreneurs, world GDP would increase by approximately 3 to 6 percent, accelerating the global economy by $2.5 to $5 trillion. Of that size, the opportunity and the reward of putting the floor on an even keel for those women who decide to make entrepreneurship their business.
The task is enormous, but at Redwood Ventures we are aware of the opportunity and today already 45 percent of the companies that are part of our portfolio were founded by women, not only because we believe that these companies have scalable business models but because we are convinced that betting on women entrepreneurs is the right bet.
Ian Paul Otero is Managing Partner of Redwood Ventures
Follow him on twitter: @iotero