How to close the gaps in financing women-led businesses: Report

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Women in entrepreneurship, as they scale up, face numerous barriers in the business world, which stem from unconscious bias and a lack of industry diversity initiatives that result in barriers to economic growth overall.

It’s a tale that stretches back decades and one that can play a damaging role to our business output, said Jennifer Reynolds, who is president and CEO of Toronto Finance International, a public-private partnership in the finance industry.

When women aren’t afforded the same opportunities, “we’re not accessing that whole talent pool,” Reynolds said. “I think that we’re not accessing the innovations that different perspectives would bring us.”

The Brookfield Institute for Innovation + Entrepreneurship, on Tuesday, released a toolkit with some practical recommendations aimed at helping financial backers better tackle the gaps in financing high-growth businesses.

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The first recommendation the institute made is for financiers to make their loan application process more flexible and transparent. Financial institutions (FIs) need to create and design loan applications that are more accessible to women. This can be done by hiring a user experience professional well-versed in barriers women face. The UX designer can identify aspects of the application process that can be anonymized to mitigate bias. FIs also need to consider that while more woman are in the labour market, they continue to take on the burden of child care, and allowances need to be made for gaps in careers.

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A second recommendation is to create a concierge service to help women founders navigate the loan process system and facilitate relationships between loan officers. It’s important not to over-burden concierge providers by ensuring adequate staffing and to encourage collaboration between all departments.

A third recommendation is to ensure limited partners (LPs) of venture capital firms put their money to fostering intersectional gender equity. That is, tying criterion for financing funds to better inclusion of women and  BIPOC entrepreneurs. It also suggests limited partners VCs have more gender and racial parity and expertise in sectors where women, both white and racialized, are likely to be concentrated.

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Further expanding on the third recommendation, VCs are encouraged not just to set targets, but to follow through on diversity policies and data tracking. This also ties in with more VCs hiring women, especially racialized women, to expand partner funding expertise. The institute also recommends that VCs, to a degree, standardize the pitch meeting process to make it more equitable.

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The report highlighted instances of explicit discrimination towards high-growth woman entrepreneurs. One was told, “I think you’re going to get married and pop out a couple of kids, and I’m not interested in investing in a mompreneur.”

Another recounted, “I don’t even know why I’m meeting with you . . . [you don’t look like] you make the hard decisions that need to be made in order to really succeed in business.”

To address the sometimes explicit and often implicit discrimination, financiers should consider having other women to participate in the investment process, the report suggests.

Financial Post

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