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Writer's pictureRick Dunham

Global business: Women entrepreneurs, stung by COVID, get aid from venture capitalists and 'angels'



By JAMILLE TRAN

Global Business Journalism reporter


Globally, unicorns are rare; female founders are even harder to find. Among the co-founders of all the 23 unicorns in Southeast Asia, only two are women: Tan Hooi Ling of Grab and Liu Lu of JustCo.


According to Statista, in 2019, only 20 per cent of the startups had a female founder. (It was 10 per cent 10 years ago.) Moreover, only around 12 per cent of the venture capital was invested in startups with at least one female founder, which had been the same since 2011.


The COVID-19 pandemic has made things worse. Over the last two years, the women workforce faced more challenges and is more likely to lose their jobs and be economically affected compared to men.

The pandemic has further exacerbated the disparity in salaries and access to funding for female founders. Funding by female founders dropped 31 per cent last year compared to 16 per cent for ventures run solely by males, according to PitchBook.


However, there is a global trend of investors who are betting on female founders. Women-led businesses took in US$46.3 billion in funding, according to data from PitchBook in 2019. That’s more than twice the number a year before and more than 15 times that in 2010.


Strikingly improved return on investment


In 2017, Patamar Capital launched a partnership with ‘Investing in Women’ to accelerate the growth of women-owned SMEs in Indonesia, the Philippines and Vietnam. Just last month, its Beacon Fund received investment from Sasakawa Peace Foundation, moving closer to the initial target of closing a US$50 million fund. This reinforces the goal of building a steady investment market around women entrepreneurs in Southeast Asia.


“We are excited about the opportunity to tap into each other’s networks and expertise to push the boundaries of gender lens investing (GLI),” said Shuyin Tang, co-founder and CEO of Beacon Fund, in a statement.





Patamar is not the only firm doing this. Indeed, this is has become a common strategy among institutional investors, angel investors, and family offices.


Simply put, GLI refers to the integration of gender-smart indicators into the investment’s analysis and decision. It is often considered a part of impact investment strategy.


Gender lens investors look at key indicators such as the proportion of women in the founding team in the senior management or whether the company offers products or services that are beneficial to women.


Last year, the global community ‘Women in VC’ and 500 Startups launched 500 Female Forces to boost representation, resources, and outreach for woman founders.


Teja Ventures, founded in 2018 by former lawyer Virginia Tan, works with a community of female entrepreneurs to contribute to Singapore’s rising startup ecosystem. Tan also runs the global startup competition ‘She Loves Tech’ in 50 countries, enabling more than US$250 million funding for roughly 5,000 female-focused startups.


Tan said at a GLI event last week that in 2020, about 80 per cent of Teja’s companies raised new funding, and the portfolio doubled in value.



GLI helps deploy capital where needed and brings return from the future growth either by providing money or backing developmental platforms.


Moreover, taking up GLI will open new opportunities for investors to discover untapped innovative ideas and invest in social causes such as workforce participation balance, gender equality, and a diverse ecosystem for economic growth.


Evidence shows that mobilizing women’s equality in the workplace could fuel financial returns. A McKinsey report of 2015 said that companies in the top quartile for gender diversity are 15 per cent more likely to have financial returns above their respective national industry medians

In another global analysis of 2,400 companies conducted by Credit Suisse, organizations with women on boards yielded higher returns on equity and higher net income growth than those lacking a women representation.


“The higher the percentage of women in top management, the greater the excess returns for shareholders,” Credit Suisse noted in the report.


SoGal Ventures, a thriving female-focused fund based in Beijing, had generated an internal rate of return at 80 per cent since its launch in 2017. The VC firm has a total of US$15 million worth of assets under management. Of its 38 portfolio companies, 35 are run by women.


“There is gold in investing in women,” said Pocket Sun, co-founder of SoGal Ventures.



Evidence from BCG proved that startups having women in the founding team delivers twice as much revenue per dollar invested than those run with sole male leadership.


This is even more interesting when we see funds with female leaders. A report by IFC found that funds with gender-balanced senior managers generate 10-20 per cent higher returns than unbalanced ones in both public and private markets.


In Southeast Asia, we have seen several prominent female names in the investment domain, such as Minette Navarrete (President of Kickstart Ventures in the Philippines), Shuyin Tang (CEO of Beacon Fund) and Vy Le (co-founder and general partner at DO Ventures in Vietnam).


Beyond women-led ventures


GLI isn’t limited to profits and returns but also encourages more innovation and most significantly contributes to the social fight for gender equality on all fronts. Therefore, women entrepreneurs and girls, women customers, and female employees can benefit from this model. GLI has gone beyond the scope of women-led startups.


“There are three gender lenses that we use,” explained Tan of Teja Ventures. “First is that at least one founder is female; the second is women as sole or disproportionate beneficiaries; the third gender lens looks at women as a full demographic, whether they are consumers, traffic, mobile workforce, or distributors.”


One of Teja’s earliest deals is with social commerce startup Frontier Markets. A last mile-assisted e-commerce firm, Frontier Markets addressed the gap of the underserved markets of 165 million rural households in India, including women. Its founder and CEO, a female, built up a network of tech-enabled women agents to market and sell commodities on their own across rural India.


“We saw that many women are micro-entrepreneurs or village agents, a huge mobile and rural workforce,” said Tan. “In this case, women were not just beneficiaries by earning income, but drivers of revenue.”


By 2025, Frontier Markets anticipates expanding its personnel to one million rural women entrepreneurs, serving up to 100 million consumers with products and services ranging from agriculture, insurance and environment to drive economic empowerment in India.


The company will leverage its B2B2C e-commerce with support from digital marketing tools, AI-enabled digital training, and a B2C solution to power the digital services and bring a stable income for women across rural India.


More investment firms have also considered incorporating GLI into their investment processes to support social well-being through gender-smart products that benefit women and girls. According to Wharton Social Impact Initiative’s Project Sage 3.0, gender-based investment raised US$4.8 billion in the capital in 2019, more than twofold the amount raised in the previous year.


Encouraging more wealthy women to invest in startups is another critical objective of GLI.


“We know that a small percentage of women feel comfortable doing investing or are involved in investing,” Vicky Saunder, founder of SheEO, said at the kickoff event of the GLI training program. “So the root for our community is in a relationship, not transactions. We want to meet the entrepreneur, watch them execute, give advice, and see where that goes.”




Brigitte Baumann, founder of Efino and GoBeyond Early Stage Investing, shared: “We learn while we’re making investments. For us, we call it group investing. We learned together and we invested together.”

This approach, however, is still unfamiliar in Southeast Asia’s nascent startup ecosystems.


“Gender lens investing is just the starting point to promote the concept of co-investment between local investors and overseas capitalists,” Minh Nguyen, co-founder of Vietnam’s ecosystem builder KisStartup, told e27. “The shortage of angel capital in Southeast Asia in general and in Vietnam, in particular, is tremendous and need to be addressed in multiple ways.”


Snapshot of gender lens investing in Southeast Asia


Even though GLI investors are still scattering, the opportunities of scaling up and growth have motivated them to take up this new investment approach, especially in Indonesia, the Philippines, and Vietnam. The three countries accounted for 80 per cent of GLI deal volume in the region, 85 per cent of which came from angel investors, according to a report co-published by Investing In Women and Value For Women in March.


“Increasingly, we see Southeast Asia as a popular place for a lot of global impact investors as it is accelerated by technology and the digital economy,” said Virginia Tan.


The COVID-19 pandemic has also been a boon to this trend as overseas investors can now meet companies, assess investment opportunities, and support post-investment online.



“This has opened investors to the realisation that they can invest anywhere, and the result has been a massive growth in investing in different regions, including Southeast Asia,” said Luan Tolosa, director at Spring Activator, a Canada-based incubator-cum-accelerator.


Leveraging these insights, Spring Activator, Indonesia’s angel investor network ANGIN, Philippine early-stage impact incubator Villgro, Pakistan’s first female-led VC fund Invest2lnnovate, and Vietnamese ecosystem builder KisStartup are hosting a training programme about GLI and cross-border investing for investors across Southeast Asia.


Organizing team of “Beyond 2021: Investing across borders and innovation”, starting from September 8th to 10th in South and Southeast Asia.


According to ANGIN, 11 per cent of investments by impact investors in Indonesia are GLI deals in sectors such as food and agribusiness and financial services. Of which, 22 per cent are tech-enabled startups.


Identifying GLI as one of the four impact investing opportunities in Indonesia, David Soukhasing, MD at ANGIN, shared with e27 that investors are investing massively in more women entrepreneurs during the 2019-2021 period. This year onwards, they will be raising dedicated gender funds in GLI.


The growth of gender lens investing in Southeast Asia has been exciting, with the number of gender lens investment vehicles increasing by 77 per cent since 2018. While this means that there is more interest and capital available for women entrepreneurs, most of this is at the US$500,000 or even larger ticket sizes.


“Despite the presence of high-potential women-led enterprises, many of them are in the early stages, needing smaller investment ticket sizes to allow entrepreneurs to test and validate their models and establish a path to scale,” said Katherine Khoo, program manager at Villgro Philippines. “In the Philippines, while we are seeing more interest from angels, deals are few and far between, and risk appetite is still low.”


This is similar to Indonesia and Vietnam, where the financing gap for women-led MSMEs equals US$26.1 billion. Meanwhile, the gap in East Asia totals US$2.3 trillion, according to the report from Investing In Women.


Attracting more foreign capital comes as a promising option, but local regulatory frameworks and currency risks remain as the key challenges for foreign angels to invest further in Southeast Asia countries like Vietnam and the Philippines. Many entrepreneurs are now choosing to set up entities outside of their home countries (such as Singapore or the US) to navigate some of these challenges and to allow for easier transactions for follow-on funding from overseas angels or funds.


Nguyen of KisStartup and Khoo of Villgro echoed this insight as they said that when global investors approach the Asian market, they often encounter legal barriers, which can be effectively minimized through co-investing with experienced local angels or request to implement the deal in a third country.



“We have seen angel investors from outside the Philippines express interest, but investments are usually made along with local co-investors, whose knowledge of the market the cross-border angels rely on,” said Khoo. “We have directly facilitated deals from angels from Japan and the United States, for example, so there’s definitely a growing interest.”


But in the case of Vietnam, even though Vietnamese tend to trust the experience, network and resource of overseas investors, local angels here are still reluctant to co-invest, largely due to the entrenched mindset of “lone wolf,” or investors who prefer to source, analysis, or invest alone, Nguyen said.


She suggested the country promote the adoption of mentor và advisor culture among wealthy individuals, who can support new businesses with their expertise and then turn angels later on. This would help solve the shortage of early-stage capital for startups in general and female entrepreneurs in particular.


In addition, Tolosa at Spring Activator offers two lessons that ecosystem players in Southeast Asia can learn from. First, build relationships with established capital in communities like Singapore, London, San Francisco to create access to capital and act as role models. Second, develop the local investing community to be able to work and invest alongside cross-border investors.


“This will ensure the growth of a vibrant local investing community that will fuel the long term growth of the local ecosystem, and connect it well with global markets and capital,” noted Tolosa.



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