Women are Swimming Against the Current of Europe's VC Flows
HSBC has launched a $1B fund to help.
Written by Grace Brennan
As global venture capital funding dips for the first time in more than a year, Europe has enjoyed a unique increase in capital flows. But not everyone has been reaping the benefits. Women founders have long been underserved in the VC space and are at risk of again being excluded in the new financing wave.
That's why British bank HSBC has launched the Female Entrepreneur Fund – a $1B lending fund aimed exclusively at women-led businesses in 11 markets, including the United Kingdom.
Last year, a mere 1% of all capital invested into venture-backed startups in Europe went to women businesses. Moreover, Europe has a noticeably lower level of entrepreneurial activity among women compared to other parts of the world, no doubt in part because of barriers to funding.
This exclusion is not only problematic for society, it inhibits innovation in business and means VCs lose significant opportunities for success. Women-owned companies have proven to be more capital efficient and produce higher returns than male-led ones; not to mention, supporting women businesses is essential to fuel post-Covid economic recovery.
Both the European startup ecosystem as a whole and individual investors need more resilient and diverse entrepreneurs to thrive. Here's why the Female Entrepreneur Fund has arrived at an especially pivotal moment, and how it can help open doors more permanently for women.
More than a capital injection.
Value-driven investment has been on the rise for some time now. After the dramatic market shifts of a global pandemic, entrepreneurs have been asking for more than big checks from investors. They want mentorship, connections, and expertise – resources that women-led businesses particularly need to gain traction and visibility.
Sam Cooper-Gray, the Global Head of Market Strategy and Engagement at HSBC Business Banking, recognizes these advanced requirements, saying in a statement that the new fund is designed to "help address the challenges and bias that female leaders face."
Beyond capital then, the Female Entrepreneur Fund enables women to tap into HSBC's network of experts, leverage valuable experience from prominent women leaders across verticals, and join an international community of innovative women entrepreneurs. This value ensures that women not only have the money to action their immediate business plans, but have a more sustainable platform to continue raising in the future.
For instance, the number of non-traditional investors is growing in Europe, and these investors typically target low-risk deals. Businesses with women at the helm are already deemed lower risk, and if armed with HSBC's fund and entrepreneurial might, women founders will be an even safer, smarter bet.
A needed financial lifeline in the pandemic.
Women were disproportionately impacted by the pandemic, being overrepresented in the hardest hit sectors. As a result, they have to navigate new obstacles, as well as time-old ones. Initiatives like the Female Entrepreneur Fund provide pathways that encourage women to enter or return to business, and keep them there.
HSBC's fund is not the first of its kind to acknowledge the additional financial needs of women after Covid. In 2021, NatWest Group allocated £2 billion to aid female-owned businesses in the UK recovering from the pandemic.
NatWest Group CEO, Alison Rose, emphasized the importance of uplifting women entrepreneurs in the wake of the crisis. On announcement of the fund, she wrote: "If women find themselves at even more of a professional disadvantage on the other side of this crisis, then we'll be attempting to build an economic recovery whilst ignoring a huge area of potential."
It's worth noting that these funds don't only serve women in the long run. The more women who can access capital, the more female founders there'll be, and the more diverse investors' portfolios will be. And that inches us closer to a world where women and men entrepreneurs are equally backed, which in turn could see the global economy grow by $5 trillion annually.
Strength in (community) numbers.
There's a reason why women General Partners are two times more likely than male GPs to invest in women founders. Women investors tend to know first-hand about hurdles to funding, and they also know how best to jump them, and reach a stable landing. Yet it's not just women investors with these insights.
Communities created by and for women are invaluable for female founders on their fundraising journey. These networks are notably powerful for those looking to scale internationally. As Cooper-Gray says, businesses led by women are "less likely to have global networks, meaning international expansion can prove particularly challenging." By harnessing communities, women can amplify their funding asks, finesse their pitching skills, and cross paths with overseas investors.
With that in mind, the HSBC Female Entrepreneur Fund is part of the bigger ROAR program, created in partnership with AllBright – a community arming women with the tools and confidence to achieve their goals. The free, 12-week program brings together female entrepreneurs, executive coaches, business funding experts, and top-performing commercial bankers to foster the development of women-led companies.
Europe's current steady VC funds may be a reflection of the region's startup strength, but it doesn't signal that the landscape is fulfilling its total potential. So long as women remain on the outside of funding, the advancement of business and economies will be limited. The HSBC fund is therefore hopefully one of many initiatives to come that will push women upstream in capital flows, and toward an ocean of overdue opportunities.