Why it’s time for women to invest in other women
Here’s something that we hope will catch on. A Boston-based venture capital firm has launched a new fund that will back only female-led start-ups.
It’s not the first such fund, either. Others, such as the Female Founders Fund and BBG Ventures, are also investing in female-led start-ups.
But, with a female investment team too, the XFactor Ventures fund from Flybridge Capital is a case of women investing in women. The $3 million fund intends to invest $100,000 in 30 companies, drive change in the venture capital sphere and generate a strong return to boot.
Women backing women
About time too when you consider the investment gender gap. In 2016, venture capitalists invested $58.2bn in companies with all-male founders, while women received just $1.46bn, according to Flybridge Capital.The good news is that venture capital is not the only sphere where women are backing women.
Women for Election, a not-for-profit organisation that aims to inspire, equip and inform women to succeed in politics, launched a crowdfunding campaign in June. Its aim was two-fold: to raise €50,000 to train 300 women to run for election and to raise its profile.
Women at Cabinet
The campaign, run by a team of volunteers with design and public relations expertise, raised almost €56,000 within its 20-day target. Almost nine out of ten of the 812 backers were women.
“The support for the campaign sends a signal to government that there is a public appetite to see more women around the Cabinet table, in the Dáil and on their local authorities,” a spokeswoman said.
In a whole host of areas, people are putting their money where their mouth is. While venture capital and politics might not be for everyone, average investors can also make their money do more than just generate a financial return. Impact investing, where people invest for return and also for social good, whether that’s gender diversity or otherwise, is rapidly gaining traction across Europe.
Investing with more than just a financial return in mind is not a new phenomenon. The concept of socially responsible investing (SRI) dates back to the 18th century when religious movements, such as the Quakers, refused to invest in companies involved in the slave trade.
Investment’s rising star
The European Sustainable Investment Forum (Eurosif), which tracks the development of SRI, found that SRI grew faster than the broader European investment market in 2016.
And, with 385 per cent growth, impact investment is the rising star of the SRI world and is gaining a significant foothold in the market.
According to Eurosif’s executive director, Flavia Micilotta, impact investing is the fastest-growing SRI strategy, now at €98bn, up from only €20bn in 2013.
“This rapid growth has been fuelled by the surge in green and social bonds,” she said. “Green and social bonds are designed to finance projects that offer environmental and or social benefits.
“Under current market conditions, social and green bonds provide investors with environmental and social benefits without sacrificing on financial returns,” Micilotta said.
The Netherlands dominates the European impact-investing market with over €40bn in assets. Denmark, Switzerland and the UK are also showing an appetite for it, she said.
While impact investing is certainly growing, questions and a degree of caution remain.
A 2016 report by McKinsey noted that impact investing meant different things to different people and it warned that further growth in the impact-investing area required consistency and clearer measurement standards.
Addressing these challenges would put impact investing on an equal footing with other investment approaches and unlock the industry’s full potential to respond to global social and environmental challenges, the report said.