Here’s why women battle in business

Businesses founded by women continue to struggle to establish themselves, because of the massive female-founder financing gap.

According to a report published by the International Financial Corporation (IFC) in 2019, South Africa had a R868-billion unmet financing demand for female founders.

This disparity often leads to low growth margins for female-founded businesses as they rely on alternative sources of funding.

For that specific reason, Future Females Empowerment Initiatives, in partnership the International Tech Hub Network, a UK government initiative conducted research on “Why Female Founders are Still Not Raising Financing Equitably in 2023”.

The overall research, which consisted of surveys with open-ended and multiple-choice questions, was conducted with five international tech hubs:

• South Africa,
• Brazil,
• Kenya,
• Indonesia,
• Nigeria.

Three questions were identified:

• What is the current financing gap for female founders globally?
• What are the barriers faced by them in raising funding?
• Why have the existing interventions that target these barriers been unsuccessful?

It revealed that female founders across the five countries are mainly bootstrapping their businesses to keep them operational and have raised an average of less than $10 000 or about R177 000 to date.

Furthermore, 95% of female founders are still actively looking for funding but most struggle with identifying the opportunities available and how to connect with them.

Plus, they are unfamiliar with the fundraising process and its requirements.

There is a wide gap between the current form of business financing that female founders use and the type of funding they need to grow their businesses.

The survey data yields extensive insight into the amount of funding raised to date across business stages, and the various sectors in which female founders operate.

The research identified the following key reasons that inform the funding gap that female founders face in South Africa:

Lack of comprehension of the fundraising process:

Only 19.5% reported confidence in their ability to go through the fundraising process. (This number raises to 46% of questioned candidates in Kenya).

All other founders indicate needing help with the fundraising process, from grant proposal writing to pitching, with 30% saying that they can’t go through the process by themselves.

Lack of information on investors:

There is a gap in information about the funding opportunities available to female founders, and the types of investors to approach: 42.1% report they do not know relevant investors to approach, (an increase of 29.4% from Brazil).

In the same vein, 39.6% report that they choose to stick with their current form of funding because they do not know how to access any other form of funding although a high percentage (91.8%) would welcome it.

Experienced gender bias:

Though there is no explicit evidence of gender bias in our survey, 71.7% of South African female founders interviewed for the report feel the fundraising process is more difficult because they are women.

This is higher than that of Indonesia where 45.6% feel this is a factor. A total of 13.2% say their biggest challenge is that investors do not take them seriously.

It is clear that female founders face big challenges globally in raising funding, especially when it comes to being educated on the funding process since a big gap for educational programmes persists.

The result of the South African White Paper explores why female-led businesses locally are still not successful in accessing finance for their businesses.

The series, consisting of a White Paper for each of the five participating countries, includes insights on the current funding needs of female entrepreneurs, how these are or are not matching the funding that is available in the market, commentary around “the gap”, and why previous interventions failed to close this gap.

Thereafter it provides solutions to target these shortfalls and how female founders can draw on the resources available to them, requiring a multi-dimensional approach.

This undertaking integrates female founders, startups, and/ or SME enablers, such as incubators, accelerators, and investors.

The integration allows for information on funding opportunities to flow freely between investors and female founders, with enablers working as binding agents that train them on the fundraising processes, and facilitate investor-founder matchmaking.

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Bezuidenhout is co-founder and COO of Future Females Empowerment Initiatives