Investments in this strategy aim to increase seed and follow-on financing to women-led businesses, enable a diverse entrepreneurial pipeline, and unlock capital for investments in issues that disproportionately impact women. The below high-level overview and associated metrics pack are intended as a developed market gender lens complement to the Navigating Impact Financial Inclusion theme.


Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Despite the fact that women control roughly $20 trillion in annual customer spending globally (70–80% of total consumer purchasing), innovation and investment remains decisively in the hands of men. Women-run businesses account for roughly 2% of all venture capital investment (1-3). When it comes to those responsible for allocating capital, just just 13% in the UK and 9% in the US are women (4, 9).

Inequity in innovation and investment leads to weak pipelines for investors to access female entrepreneurs, women-centered products being viewed as a niche market, and women entrepreneurs facing systemic challenges in accessing investment capital. Challenges stem from two main sources:

  • Unconscious gender bias throughout the investment process. Research shows that the current predominantly male investor landscape hampers female founders from accessing investment capital at the same level as their male peers (5-6). Examples include more favorable reactions to male entrepreneurs during pitch meetings (even when content is the same) and asking different questions of female and male founders during due diligence (7-8).
  • Marginalizing women-centered products and services. Products designed specifically for women and other diverse groups are often siloed as “niche” products despite large scale market opportunity. These products therefore often struggle to attract venture capital and may be unable to scale effectively (10).

Investments in this strategy can:

  • increase seed and follow-on financing to women-led businesses;
  • unlock capital for investments in issues that disproportionately impact women;
  • ensure capital meets the context-specific needs of investees; and
  • support diversity and inclusion at the ecosystem level to enable entrepreneurial pipeline.

What is the scale of the problem?

Globally, there is significant gender disparity in investment,  innovation, and decision-making in access to financial capital through private debt and equity. There is a reported USD 1.7 trillion shortfall in access to finance for women-owned microenterprises and SMEs (6). Illustrative statistics include:

  • In 2018, female-founded startups in the US accounted for only 2% (USD 1.9 billion) of the overall USD 85 billion raised from venture capital funding, even though women own 38% of businesses (7). In contrast, 79% of that funding went to all-male teams (7).
  • A recent report found that 93% of all funds raised in 2018 by European companies backed by venture capital went to companies with all-male founding teams (8).
  • In the UK, two-thirds of VC firms have no women making investment decisions at all (9). Only 27% of UK venture capital employees (including administrative and marketing roles) are female (9).
  • Among venture capital firms in the United States, only 8% have a woman partner, fewer than 5% have women on their executive teams and fewer than 3% had a female CEO (10).
  • In 2016, US companies with at least one female founder raised 19% of all seed rounds, 14% of early-stage venture and 8% of late-stage venture rounds (11).


Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Women: Greater access to seed and Series A financing can improve the financial outcomes, decision-making authority, and overall quality of life for women business owners and their employees.

Women of Color or of Diverse Backgrounds: In the United States, women of color fair considerably worse than other women, with only 0.2% of venture capital flowing to their companies despite comprising the fastest growing segment of female business owners (10). Removing biases from the traditional venture capital processes and outcomes could have significant positive impact for women from diverse backgrounds.

What are the geographic attributes of those who are affected?

This strategy can be applied to all geographies. Venture capital is currently concentrated in just a handful of cities, primarily in the US, Asia, and Europe. However, strategies that remove bias from traditional financing processes and unlock capital for traditionally underserved populations, such as women, can open opportunities for regions and other underserved markets, such as peri-urban, rural, or emerging markets. Asia is the second most active region for venture financing by women-led firms. However, only 76 deals were made in Asia by women-led venture firms from January to October 2017 (12). Within Latin America, the financing gap (the financing needed that is not currently available for women-owned microbusinesses and SMEs) is estimated at approximately USD 98 billion (6).


Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Actively employing a financial inclusion strategy by increasing access to seed and Series A financing for women-led or women-centered businesses can lead to improved financial and social returns.

As women are more likely to enter commercial markets to create wealth and social change, investing in female-led businesses is both financially and socially prudent (13). Existing research into this area suggests that women are more likely than male counterparts to be motivated by social impact or build a social impact business (14). Therefore, increasing seed and Series A financing for women-led or focused businesses has the potential to address broader social inequality issues by enabling marginalized or underserved groups access to products and services.

While it is important to note that not all female investors will want to back female founders, there is evidence that female investment partners are twice as likely to invest in companies with women on the management team, and three times as likely to invest in female CEOs (10). Getting more women in venture capital has a positive effect for women-led companies and women-focused products and services.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Globally, there is an estimated USD 1.7 trillion shortfall in access to finance for women-owned microenterprises and SMEs. By helping to close this gap, investments in this strategy could have wide-ranging impact not only on the women founders and business owners invested in, but for potential employees, families of the founders and employees, and the communities in which the investees are located. In addition, millions of consumers could benefit from greater investment in underserved markets that are not currently receiving adequate venture capital.

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

In the US, female-owned businesses generate USD 1.8 trillion revenue (15). Unlocking capital for investments in issues that disproportionately impact women and other diverse groups can potentially create new market opportunities for products which have traditionally been excluded, considered unmarketable, or viewed as niche markets. For example:

  • The femtech industry, which is focused on disrupting traditional methods of health education and service delivery specifically targeted at women’s health across the life cycle (menstruation, fertility, breast care, etc.), is dominated by female founders and focuses on product design for women (16). By targeting a group previously considered ”niche” and addressing their needs, the industry is estimated to reach USD 50 billion by 2025 (17).
  • Over the past five years, the emergence of mobile banking in Sub-Saharan Africa has increased the accessibility of banking services to those underserved and overlooked by existing services. Twelve percent of adults (64 million) in Sub-Saharan Africa now have some form of mobile wallet such as M-Pesa, Mobikash or Airtel money which are not connected to banks (18). These services have enabled women and rural populations to access financial services and control their own finances by responding to their needs and circumstances (19).


Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

External Risk: Unconscious biases within traditional venture capital ecosystems and institutions, in addition to discriminatory laws against women in some parts of the world, may limit the effectiveness of the strategy. In the case of the former, organizations can mitigate this risk by investing resources in understanding how bias impacts investment decision-making, and identifying new ways to analyze risk and opportunities across their portfolio through internal audits, policies, and trainings that enable financial inclusion (20). In the case of the latter, organizations can advocate for more gender equitable laws through their engagements with governments and the private sector by joining collaborative efforts and by making public statements in favor of gender equality. Furthermore, they can consider creative partnerships or tailored terms of investments that can increase a woman’s control or ownership of an investment despite discriminatory laws.

Execution Risk: Lack of attention to whether the type, terms and conditions of capital are appropriate for the investee’s needs, preferences, and context could result in detrimental impact, such as over-indebtedness, inability to weather slowed growth or unexpected business interruptions, or diluted ownership (21). For guidance on applying a gender lens to the investment process, see Criterion Institute’s Designing a Gender Lens Investing Action Plan.

What are likely consequences of these impact risk factors?

Failure to appropriately address these risks could limit the positive impact of the strategy or create negative consequences. For instance, providing debt capital to an investee with a stable but slow-growth business at a high interest rate and with too short-term of a payback schedule could hinder operations and put the investee out of business, costing jobs and creating other unintended consequences.

Illustrative Investment

Have an illustrative investment we should consider? Let us know!

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

New Venture Financing and Subsequent Business Growth in Men- and Women-Led Businesses Alsos, Gry Agnete, Espen John Isaksen, and Elisabet Ljunggren. "New Venture Financing and Subsequent Business Growth in Men- and Women-Led Businesses." Entrepreneurship Theory and Practice 30, no. 5 (2006): 667-86. doi:10.1111/j.1540-6520.2006.00141.x.

This quantitative study examines the funding behavior among men and women business founders, and how this is associated with early growth of newly founded businesses. While women are found to grow their businesses less during the first nineteen months after registration, the gender difference disappear when controlling for the amount of financial capital invested in their new businesses. This finding indicates that the higher amount of financial capital men procure is one important reason why men-led ventures grow more than women-led ventures. There seems to be a funding gap for women restricting the growth of women’s new businesses.

Testing the Female Underperformance Hypothesis Rietz, Anita Du, and Henrekson, Magnus. "Testing the Female Underperformance Hypothesis." Small Business Economics 14 (2000): 1-10.

This study conducts a comprehensive test on a large Swedish sample of 4,200 entrepreneurs (405 females) with 1 to 20 employees in all sectors of the economy. In an extensive multivariate regression with a large number of controls, it turns out that female underperformance disappears for three out of four performance variables, including (i) profitability, (ii) employment and (iii) orders increased in the previous years.

A Longitudinal Study of the Characteristics, Business Creation Process and Outcome Differences of Canadian Female vs. Male Nascent Entrepreneurs Menzies, Teresa V., Monica Diochon, Yvon Gasse, and Susan Elgie. "A Longitudinal Study of the Characteristics, Business Creation Process and Outcome Differences of Canadian Female vs. Male Nascent Entrepreneurs." The International Entrepreneurship and Management Journal 2, no. 4 (2006): 441-53. doi:10.1007/s11365-006-0013-0.

This paper presents an exploratory longitudinal study of a random sample of Canadian nascent entrepreneurs. The authors examined the differences between male and female personal characteristics, gestational activities and the ability to achieve an operational business. There appear to be few differences between male and female nascent entrepreneurs e.g. university degree major and growth expectations. However, there is no significant difference in the likelihood between men and women of achieving an operating business.

How Do Female Entrepreneurs Perform? Evidence From Three Developing Regions Bardasi, Elena, Shwetlena Sabarwal, and Katherine Terrell. "How Do Female Entrepreneurs Perform? Evidence from Three Developing Regions." Small Business Economics 37, no. 4 (2011): 417-41. doi:10.1007/s11187-011-9374-z.

Using the World Bank Enterprise Survey data, the authors engaged in statistical analysis of the performance gaps between male- and female-owned companies in three regions—Eastern Europe and Central Asia (ECA), Latin America (LA), and Sub-Saharan Africa (SSA). Amongst the findings are significant gender gaps between male- and female-owned companies in terms of firm size, but much smaller gaps in terms of firm efficiency and growth. While female entrepreneurs receive smaller loans than their male counterparts, the returns from each dollar they receive is no lower in terms of overall sales revenue.

When Do Female-Owned Businesses Out-Survive Male-Owned Businesses? A Disaggregated Approach by Industry and Geography Kalnins, Arturs, and Michele Williams. "When Do Female-owned Businesses Out-survive Male-owned Businesses? A Disaggregated Approach by Industry and Geography." Journal of Business Venturing 29, no. 6 (2014): 822-35. doi:10.1016/j.jbusvent.2013.12.001.

Motivated by social constructionism and feminist theory, the authors argued that different geographic and industrial contexts might provide differing opportunities and constraints for female business owners. They tested these hypotheses empirically by analyzing one million businesses in Texas. It is found that female-owned businesses out-survived male-owned businesses in a wide variety of industries. In terms of geographic area, female-owned businesses consistently out-survived male-owned businesses in the largest cities.

What Makes Muslim Women Entrepreneurs Successful? A Field Study Examining Religiosity and Social Capital in Tunisia Baranik, Lisa, Brandon Gorman, and William Wales. "What Makes Muslim Women Entrepreneurs Successful? A Field Study Examining Religiosity and Social Capital in Tunisia." (2018): 208-219. doi:10.31235/

This quantitative study about Tunisian female entrepreneurs' participation in training programs reveal that two forms of social capital, marital status and wasta, are related to training center directors’ ratings of women entrepreneurs’ performance, suggesting that social capital is a critical asset for Muslim women entrepreneurs. The authors recommend that training organizations supporting entrepreneurs directly assist women in the development of social capital and acknowledge, rather than ignore, that nepotism and wasta are linked to entrepreneurial success in some cultures.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.