News: Lack of capital worsens existing gap for women-led small businesses

Funding & Investment

Lack of capital worsens existing gap for women-led small businesses

Lack of access to funding, business networks and the outbreak of COVID-19 have worsened pre-existing inequities for women-led businesses in Australia.
Lack of capital worsens existing gap for women-led small businesses

Women-led businesses in Australia continue to struggle amid persistent lack of access to funding, revealed a research conducted by the Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) office.

In the ASBFEO survey of more than 600 Australian women-owned, women-led small businesses, nearly half (43%) of respondents cited access to funds as a central barrier to growth.

Ombudsman Bruce Billson says it’s disappointing that on International Women’s Day 2022, female entrepreneurs are still facing headwinds when trying to grow their businesses.

“On International Women’s Day, it’s important to recognise the obvious economic benefits that would flow from addressing barriers to growth for the rapidly increasing number of Australian women small business owners,” Ombudsman Bruce Billson said.

Reportedly, two-thirds of new businesses created in Australia in the past decade have been founded by women (Xero Boss Insights 2021) and there has been a 46% jump in women business owners over the past 20 years (ABS).

However, raising capital remains a stubborn deterrent to business growth. In fact, the recent ‘State of Australian Startup Funding’ report found 82% of female founders believe gender impacted their ability to raise venture capital funding. And just a mere 10% of female founders felt highly confident they would raise their next funding round, compared to a significantly high 63% of male founders.

Additionally, the State of Australian Startup Funding 2021 report also found 59%of female founders felt somewhat confident they would raise their next funding round, with 67% feeling at least somewhat supported by Australia’s startup ecosystem.

According to reports, the share of total capital invested in startups with at least one female founder slipped considerably, falling from 28% in 2020 to 22% in 2021. Further, the percentage of equity funding events involving startups with at least one female founder only increased by one percentage point to 19% in 2021. 

Artificial intelligence (AI) and big data was the sector with the highest percentage of teams with at least one female founder at 50%, followed by biotech at more than 40% and blockchain hovering just above 30%.

Five of the 10 largest deals in 2021 involved the mixed-gender founding teams at Judo Capital (ASX: JDO), Airwallex, Canva and Octopus Deploy. However, only 2% of total capital raised went to female-only founder teams.

“Globally, the World Bank reports access to finance is a ‘major hurdle’ as women are left with an estimated $1.7 Tn of unmet demand for credit,” Billson said adding, “By reducing headwinds and energising female enterprise there is a significant economic upside. Research by Asialink suggests boosting the number of female business owners to equal that of men, could add between $70 Bn and $135 Bn to our economy.”

The World Economic Forum estimates it would take 257 years to reach economic parity between women and men globally. And the current figures aren’t helping drive a swifter change. In fact, COVID-19 has worsened “pre-existing inequalities that have historically seen women face greater economic and employment uncertainty and take on a greater share of the unpaid care burden,” and the gap “is expected to increase”, according to Asialink's Empowering Women Innovation Leaders in Australia and Southeast Asia: A regional blueprint report. 

The organisation further found that female-owned businesses are 5.9% more likely to close during COVID-19 compared to male-owned businesses worldwide.

“Women’s economic empowerment is key to our national recovery after an incredibly challenging couple of years. My office will continue its work in identifying opportunities to improve the environment for small business and women’s entrepreneurship,” Billson added.

The Asialink report highlighted "women in Australia do not have the same access to business networks as men" and calls on sectors such as "government, business and civil society" to introduce "greater regional opportunities for networking".

“We know there is a gendered impact of disasters. We know issues related to gender equality and women’s rights are sidelined during times of crisis — during relief and recovery. That doesn’t only have an immediate effect, it has a generational and long-lasting effect,” women’s empowerment and gender equality, The Asia Foundation Senior Director Jane Sloane said.

“I am concerned about women’s political participation and voices during the time of COVID-19. Women’s leadership and contribution to decision-making saves lives. It’s not an add on. Women’s access to economic opportunities and security contribute to the wellbeing of their families, their communities and countries. Economic empowerment of women stabilises the family and, in turn, the economy and society as a whole.”

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Topics: Funding & Investment, Diversity, Entrepreneurship

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