Unlocking the potential of female-led businesses
To support women in their ambitions and to unlock their full potential, financial institutions can help them build their financial knowledge and confidence by providing connectivity, tailored advice and education
IN an uncertain world, a key priority for Singapore is to develop and grow local ventures into leading companies. Female-led businesses play an important role in the economy.
Today, one in four Singapore companies is owned by females, and the number of women-owned companies have grown by more than 120 per cent in the last 15 years, contributing to more than 20 per cent of the companies’ total revenues.
Similarly in Asia, 24 per cent of high-net-worth women are business owners or entrepreneurs, compared with 15 per cent of men.
One of the key challenges that female entrepreneurs face is access to the capital required to expand and grow their businesses. According to the UBS Funding Gap Paper, even though 38 per cent of startup founders were women, only 2 per cent of the investments in US-based startups were for women-led ventures and less than 3 per cent of funding went to companies with a female CEO.
This is unfortunate. If women and men participated equally as entrepreneurs, global gross domestic product would rise by 3 to 6 per cent, or by US$2.5 trillion to US$5 trillion. Tackling the funding gap for female founders and entrepreneurs could boost the economy and provide a powerful untapped opportunity for investors.
Globally, the number of female billionaires grew 81 per cent over the last 10 years, mainly driven by those whose success was self-made. In Asia-Pacific, the number of female billionaires has more than doubled since 2015, and their wealth multiplied by more than three times – from US$94 billion in 2015 to US$308 billion today, outperforming their male peers.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
This is not really surprising given that on average, female-led businesses generate 78 cents of revenue per dollar invested, compared to 31 cents for those led by men, as highlighted by a global study by Boston Consulting Group. Female founders also achieve exits a year faster than the overall market at 6.7 years.
Addressing the funding gap with blended finance
Various research has shown that women seek not only returns or profits but also purpose. They aspire to create a meaningful difference in the world and positively influence the lives of others. Female entrepreneurs show a distinct tendency to build social purpose into their businesses, which can be reflected in their product design, such as adaptive clothing for people with disabilities, and human resource practices such as a flexible work schedule for working mothers.
Blended finance, which uses capital from philanthropic and public sources to catalyse commercial investment, has been gaining momentum and more visibility. In the past decade, blended finance has attracted more than US$200 billion in capital for sustainable development and is an alternative to traditional sources of funding.
SEE ALSO
Financial institutions, venture capital firms and angel investors use sustainability information as an integral part of their due diligence process and a portfolio screening tool. Female-owned businesses should consider emphasising their social impact and sustainability initiatives in their business narratives as it would increase their success in securing funding, as highlighted in a Harvard Business Review report.
Building confidence and connections
The existence of a robust social network is a key determinant of the future success of entrepreneurs and founders. Having a strong network in the venture capital space also plays a critical role in deal sourcing, deal syndication and decision making.
Research showed that men are more likely to be part of a social network that included other men, while most non-investing women had few or no female peers or role models who were angel investors.
Hence male entrepreneurs are more likely to receive or have access to relevant guidance from their network, resulting in higher motivation and validation of their thinking and business model; more useful information on vendors and clients; as well as useful inputs for their business plans.
What the female entrepreneurs often lack are the contacts and knowledge needed to take their business to the next level. This is the key reason behind the launch of the UBS Female Founders programme, a business network that connects female and non-binary founders with like-minded entrepreneurs, providing access to expert support and training on attracting funding.
The conversations we have with our entrepreneur clients often go beyond the initial financing and business exit options. For example, personal financial planning guidance for early-stage founders can ensure that they are financially resilient in preparation for exit. In some cases, this can extend the time of exit to realise further growth. Our role is to advise and enable female clients, both founders and investors, to effect the change they want to see in the world.
Over the next decade, more women will rise to leadership positions, moving closer to parity with their male peers. Women’s investment needs and attitudes differ from men, placing purpose at the heart of their investments. They show a preference for sustainable investing, wealth planning and family advisory.
To support women in their financial journey, we recommend a three-pronged strategy: liquidity, longevity and legacy. The liquidity strategy helps manage short-term cash flow needs. The longevity strategy focuses on meeting lifetime goals, and the legacy strategy ensures wealth transfer to future generations while creating a positive societal impact.
The 2020s are set to be transformational for women’s wealth. Women now control more than a third of the world’s total private investable wealth, and this is growing. Around US$83 trillion is set to change hands in the next 20 to 25 years, with more than 10 per cent to be transferred horizontally between spouses, primarily to women, before being gifted to the next generation. Seventy per cent of inherited wealth is expected to be in women’s hands.
To support women in their ambitions and to unlock their full potential, financial institutions can help them build their financial knowledge and confidence by providing connectivity, tailored advice and education. Empowering women is not a zero-sum game; we believe it will significantly contribute to the growth of our society and economy.
The writer is head of wealth management Singapore, UBS Global Wealth Management, and IBF fellow
Copyright SPH Media. All rights reserved.
