FemTech startups have managed to raise an impressive $1.3 billion as of August this year. This is double what they earned in 2020 and a long way from the $62 million they made in their first year of business.
The industry is projected to grow globally to $60 billion by 2027. Despite this phenomenal growth, there are still numerous investment opportunities available that can further promote women’s health.
Gender Lens Investing (GLI) involves investing in companies that offer benefits to women by improving economic opportunities and helping to secure the social well-being of girls and women. It also provides worldwide funding to female-owned and operated businesses, as well as to companies that have an excellent track record of employing women or those that improve the lives of girls and women with their products.
FemTech’s Impact on Gender Lens Investments
FemTech addresses a critical and underfunded area – female health. Unfortunately, medical research often overlooks the effects of medication and treatments on the female body.
Consider the significant disparity in funding between erectile dysfunction and breast cancer. In 2020, $780 million was spent on breast cancer research, while $1 billion was spent on erectile dysfunction research. This is not to say that one area is more important than the other, but rather to highlight the discrepancy in funding.
FemTech has stepped in to address this gap. These companies research exclusively female issues and produce products that are much needed by women and girls. In fact, the market for menopausal products has exploded in the last year.
This is what Gender Lens Investing looks like in practice: investing in companies that research and produce female-based goods and services. FemTech also helps provide financial support to these businesses, filling a critical gap that many female entrepreneurs face when starting a business. FemTech, or female technology, is a category of software, products, diagnostics, and services that focus on female health using technology.
Defining Gender Lens Investing
Gender lens investing is a sub-category of impact investing, which involves investing in companies, organizations, or funds that create social and environmental benefits while providing a financial return.
In traditional investing, companies led by men tend to receive the most attention. However, if one seeks to achieve diversity in their investment portfolio, it is important to invest in companies led by women too. Shockingly, only 5% of Fortune 500 companies are female-owned or have female managers. Therefore, unless one is explicitly looking for female-led investments, they may not be invested in one.
The introduction data shows that the FemTech industry is highly lucrative, leading to great investment returns!
I understand that gender lens investing is a new concept. Investment decisions are typically based on historical returns within a given period. However, it is worth considering how many investors have poured money into male-led companies that have ultimately failed. Why not invest in female-led and managed companies instead?
When investing, it is not always about who is leading the company; most investors do not scrutinize the leadership of an organization before investing. However, it is important to note that modern-day investing should offer more than just financial benefits.
A global study of female-led businesses projected that if women were employed at the same rate as men, in the same roles, and with the same wages, the global economy could grow by $12 to $28 trillion by 2025. This is an immense growth in just four years, which could be achieved by directing funds towards female-led and managed businesses!
This is an economical solution that should be utilized now for the benefit of all.
One benefit of investing in female-led companies is that women tend to use their financial control to give back to their communities and donate to charities, which can have a positive impact on the global economy.
Breaking Down Gender Lens Investing Further
Gender lens investing can be divided into two categories. The first category involves investments that address gender issues and promote equality. These can include investments in female-owned and managed businesses. Such investments can have a positive trickle-down effect, as children of these women are likely to invest in companies that support gender equality. The second category involves predominantly female-based businesses, female-owned and employers who may have a few male employees. These businesses may use predominantly female supply chains and cater to a mostly female customer base.
For example, a female medical group of cardiologists may refer their female patients to other female surgeons and primary care providers as a professional courtesy. They may also use durable medical goods and services from female-owned companies. Another idea in this category is investing in businesses that promote products and services that vastly improve the lives of girls and women. FemTech has dominated this area with software designed to do just that.
Proctor and Gamble has started a rewards program that falls into this category in the US. Through surveys, daily challenges, and purchases, individuals can earn points that can be used for the betterment of children, animals, and the environment. These programs include purchasing a book for an early development program for babies, providing ten meals for a person in need, or one week of clean drinking water for a family in need, among others.
Gender lens investing focuses on investing in business loans and grants for female-owned and based businesses and establishing female education and mentoring opportunities. When considering such investments, it is important to research the financial health of the business and its potential for growth, as well as the company’s commitment to gender equality. This includes examining the company’s structure, culture, policies, and work environment, as well as how they track and monitor their success and failure.
In essence, gender lens investing is similar to researching investments in any other business or fund. The difference lies in the companies’ commitment to gender equality and their business practices. Investing in companies that prioritize gender equality can have a positive impact on both the investor and the wider world.
The Importance of Gender Lens Investing
In a previous article, I discussed the gender gap in wages and leadership roles. While it is important to address this gap to promote equality, gender lens investing can also have a positive impact on female business owners and management.
Research has shown that investing with a gender lens can lead to long-term benefits for a business. For example, companies owned and managed by women, with female executives on their boards, tend to outperform those without such diversity.
It is concerning that women represent 50% of the world’s population, yet their representation in the global workforce is still lacking. This untapped potential is a missed opportunity for businesses.
Gender diversity can bring strength to a team, as studies have shown that motivated and creative employees lead to better financial performance. It’s no surprise that combining the best attributes of both sexes can create an impressive team that generates substantial revenue through a great product. Any CEO or investor would want to be part of that.
Women are becoming more aware of their purchasing power, and companies are starting to take notice. There is a growing market for women-owned businesses and female-based products.
For up-and-coming entrepreneurs, gender lens investing should be a consideration in achieving future success. It is in the entrepreneur’s best interest to keep these strategies in mind when doing business. The world is changing, and gender lens investing is a step towards a more inclusive future.
Research Backs Gender Lens Investing Globally and in the US
Recent studies have shown that companies with gender-diverse boards have a lower incidence of fraud, higher share price performance, and improved risk-management. These reasons provide a sound basis for investing.
In the last three years, eleven new gender lens funds have been created. However, women only make up one-third of S&P board seats, with a mere 6% of seats held by women.
Gender lens investing is rapidly increasing globally, with private debt vehicles (distressed debt, real estate, banks, etc.) raising significant capital. Additionally, private equity and venture capital investment increased from $1 billion in 2017 to $4.8 billion in 2019 alone.
Impact investors in India, who have historically ignored gender lens investing, are now recognizing its benefits. Unfortunately, their previous attitude towards gender-related investment resulted in years of lost investment revenue. The saddest part of this is the loss to women socially and financially, and the loss of value to female-based Indian companies.
A recent study of international companies with a balanced male-female leadership reported a 25% higher company valuation than those with non-existent diversity. Furthermore, women-led start-ups were more financially successful than their peers in this study. Evidence suggests that female-founded companies generated more than twice the revenue per invested dollar than their male counterparts.
Male-based businesses have long overlooked the specific needs of women, such as products, services, and business plans that women identify and capitalize on. Consequently, female-based businesses bring healthy competition and a variety of goods and services that were not previously available.
In India, female-based businesses have seen growth in many sectors, particularly in female-oriented goods and services, such as healthcare start-ups offering breast screenings and lingerie (which is quite taboo in India) by changing how it can be obtained. The effects of these are women learning to love their body types, build self-worth, and increase their confidence.
Sheroes, India’s social network exclusively for women, provides 16 million women with a platform to discuss common issues and challenges. It offers female products, mental health services, and short-term loans provided by non-banking institutions. They have come a long way in a short time.
Unfortunately, Indian investors are not taking full advantage of the benefits of gender lens investing. It is unclear if this is due to the small population of female business owners or if they don’t have a way to track the successful companies to choose a good gender lens investment.
Creating More Global Gender Lens Investing
Gender lens investing has been adversely affected by the pandemic, with a 4.2% loss of female employment between 2019 and 2020, compared to a 3% loss for men. It is believed that the pandemic’s impact on women staying home with their children accounts for much of this.
Prior to the pandemic, the 2X Challenge, an initiative launched during the G7 summit in 2019, used unprecedented amounts of money to empower women by supporting projects created by female entrepreneurs as business leaders, employees, and consumers of goods and services. Having surpassed their target goal, they announced in June that their new goal will be $15 billion by the end of 2022.
In the last three years, they have given over 200 projects to businesses that have qualified to receive the funds. In the previous twelve months, the number of projects in sub-Saharan Africa has quadrupled, while Latin America has received the most funding. Currently, the initiative is helping female-based businesses manage the impacts of Covid-19, assisting women in accessing better employment, and building resilient businesses.
Globally, women represent a growth market bigger than China and India combined. Funding effective ways to support these women will increase gender equity, reduce poverty, and promote better inclusivity and stronger economic growth. The 2X Initiative has established a criterion that has become the Global Market Standard for gender lens investing. In addition, they recently joined forces with OECD (Organization for Economic Co-operation and Development), whose worldwide participants include 38 countries. Its Development Assistance Committee (DAC) promotes accountability in financial gender equity.
DAC has supported PEG Africa, a solar power company in South Africa that provides in-home systems. PEG was funded by the UK’s CDC in a $12 million investment. They have also helped a Ghana company increase women’s employment from 22% to 44%. In addition, they financed Tunisia’s leading microfinance institution, creating access to microcredits for 730,000 female entrepreneurs.
Since the emergence of Covid, gender lens investing has made up only 2% of all investments, leading to a decrease in funding for female-based start-ups. As a result, many lending platforms are currently re-evaluating gender lens investing before creating new female-based investments. It is believed that supporting female entrepreneurs is the key to overcoming gender inequity.
The Gender Lens Inequity Initiative has a Repository of online resources and studies to increase your investing knowledge. They include case studies and investing strategies. This is a fantastic place to start if you are serious about gender lens investing. You can find them at https://thegiin.org/gender-lens-investing-repository.
If you are interested in learning more about investing through the 2X Challenge or need financing through their Initiative, you can find them at https://www.2xchallenge.org.