Accelerators Accentuate the Gender Finance Gap for Women Entrepreneurs in Emerging Markets
Dubai, United Arab Emirates, February 16, 2020 – IFC, a member of the World Bank Group, announced today the launch of the new ScaleX program at the Women Entrepreneurs Finance Initiative (We-Fi) Middle East and North Africa Summit to incentivize support for women-led start-ups as they accelerate into mainstream businesses.
Women entrepreneurs in emerging markets face a daunting gender finance gap when it comes to growing their start-ups with only 11% of enterprises that actually attain seed funding being female-led. New research shows that despite women leading half the start-ups that participate in accelerators—entities designed to train and support the development of start-ups to become investment ready—they continue to face greatly unequal access to capital.
“Accelerators need to overcome investor bias to help women entrepreneurs in emerging markets get the start-up and seed funding needed to grow their businesses,” said William Sonneborn, IFC’s Senior Director for Disruptive Technologies and Funds. “We are launching the ScaleX program to incentivize accelerators to help source adequate equity financing for female entrepreneurs.”
New research on “Venture Capital and the Gender Financing Gap: The Role of Accelerators”, developed by IFC and the World Bank Group Gender Innovation Lab in partnership with Village Capital and We-Fi, studies the steep differential between financing for male and female-led start-ups post-acceleration and finds perceived risk and investor bias are the most likely causes.
"Our research found that acceleration actually seems to increase the gap in equity fundraising” said Allie Burns, CEO of Village Capital. “In fact, while acceleration is effective at helping male-led startups raise equity, it has little impact on female founders. As a result, male-led startups increase the amount of equity they raise post-acceleration by 2.6 times as much as startups with a female founder.”
The ScaleX program will incentivize accelerators to address these challenges. It will incentivize emerging markets accelerators that work with women-led businesses by providing performance-based payments of $25,000 for every accelerated woman entrepreneur that raises a $1 million from investors in start-up and seed funding. These performance-linked payments will encourage accelerators to spend extra time and effort to actively help women entrepreneurs raise equity investment. IFC and We-Fi will launch the initial pilot program with funding of $1m in bonuses to support 40 women-led companies in raising $1m of equity funding each, catalyzing a total of $40m into women-led startups.
IFC is also setting up a coalition of like-minded investors committed to addressing the gender funding gap. The ScaleX Coalition will bring together investors interested in investing in startups led by women and supporting women, so the accelerators can work with them to convert their interest into actual investment funding. The network will help strengthen the pipeline of investible transactions available to investors creating a win-win for both investors seeking to invest in women-led startups, accelerators seeking to eliminate the gender gap and women-led startups seeking equity financing.
These efforts build on IFC’s objective of achieving gender balance in private equity and venture capital. Increasing female ownership of startups that grow mature and achieve exits can lead to significant asset ownership and wealth creation for women in emerging markets. For more information about IFC’s ScaleX initiative: www.ifc.org/ScaleX