Article by: Lillian Kazmierczak - Finance Writer for Toarc United
FemTech businesses have raised $1.3 billion as of August this year. That is double what they earned in 2020 and a long way from the $62 million they made in the first year of their start-up.
The industry is predicting an increase in its global growth to $60 billion by 2027. Despite this phenomenal growth, there are still plenty of investment opportunities that can increase the impact of promoting women's health.
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Gender Lens Investing (GLI) is 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 global funding to female-owned and operated businesses and businesses with an excellent track record of employing women or companies that improve the lives of girls and women with their products.
FemTech's Impact on Gender Lens Investments
FemTech addresses an unfunded and under-researched area…female health. Medical research rarely accounts for the effects of medication and treatments on the female body.
Take a look at the amounts of money spent on Erectile Dysfunction and Breast Cancer (keeping in mind that no one has ever died from a terminal erection). You will find that in 2020 $780 million was spent on breast cancer versus $1 billion spent on erectile dysfunction. I'm not saying this wrong (though my outrage is palpable!). I am simply showing that money is invested in what the investor deems most important…
This is where FemTech stepped in. FemTech is a group of companies that research only female issues, companies that make products needed by girls and women. The market for products for Menopause has exploded in the last year.
This is Gender Lens Investing in example and definition: Investing in companies who employ and research female-based goods and services. FemTech also helps fill the gaps in financial backing for these businesses. FemTech fills a need that most female entrepreneurs find most challenging when starting a business. If you haven't read my blog on Female Entrepreneurial Struggles, you can find it in the Articles and Resources section of toarcunited.com. FemTech or female technology is a category of female-based software, products, diagnostics, and services that focus on female health using technology.
Defining Gender Lens Investing
Gender lens investing falls in a sub-category of Impact Investing (investing in a company, organization, or fund that creates social and environmental benefits that create a financial return).
When you look at traditional investing, you look at male-dominated companies. If you are genuinely looking to diversify, shouldn't you be investing in female-based companies as well? Only 5% of Fortune 500 companies are female-owned or have female managers. So, unless you are explicitly looking for female-based investments, you are probably not invested in one.
The numbers in the intro show that the FemTech industry is lucrative, translating into great investment returns!
I realize gender lens investing is a newer concept. Investments are determined on a history of returns in a given period, but how many people invest in male-based companies that have had poor returns and have simply failed. So, why not invest in female-based and managed companies?
Investing is not about company leadership; most of us are not looking at who's at the helm of the ship we are looking to invest in (though we should be!). Today's investing should offer more than a financial benefit to an investor and the investment.
A global study of female-owned and run companies projected that if all women were employed at the same rate, in the same role, and the same wage as men, the global economy could be $12 to $28 trillion larger by 2025. That is immense growth in four years, just by funneling funds toward female-based and managed businesses!
That is an economical solution that needs to be utilized now.
The boon to the global economy is partly because women use their financial control to put their money back into the community and donate to charities.
Breaking Down Gender Lens Investing Further
When you start breaking it down a little more, gender lens investing falls into two categories. An investment that addresses gender issues and improves equality or your investment in an approach or strategy using an informed investment decision. I'll explain this a bit more.
If you invest to address a gender issue or create better equality, you have invested in an owned, operated, and female-managed business. There is a trickle-down effect that many do not give much thought to. Most of these women have children who are also affected by how this business is invested. Children who watch a parent's business grow are likely to invest in a way that will support the same companies. Gender lens investors will influence a new generation of gender lens investors; it is a full-circle investment.
The second category is predominantly female-based businesses, female-owned, and employers who may have a few male employees. But, they also use a predominantly female supply chain, and the group who uses their good or services are female.
Let's use a female medical group of cardiologists as an example. As a professional courtesy, they refer their female patients to other female surgeons, PCPs, etc. In addition, they use durable medical goods and services from female-owned companies.
As a former nurse in the Healthcare field, this has been awesome to watch and be a part of. When I started Nursing, medicine was a male-dominated field. Female doctors were as rare as male nurses. Now medicine is one of a few gender equity established sectors. While there is still work to do in the wages area, the last decade has shown huge improvements.
Another idea in this category is business investing that promotes products and services that vastly improve the lives of girls and women. Again, FemTech has dominated this area with software designed to do that.
Proctor and Gamble has started a rewards program that falls into this category in the US. Through surveys, daily challenges, and purchases, you earn points that can be used for the betterment of children, animals, and the environment. These programs include your points purchasing a book for an early development program for babies, providing ten meals for a person in need, one week of clean drinking water for a family in need, plus eight other great social improvement options.
I joined about a year ago; I hate surveys, but if me answering some marketing-based questions can provide a girl in a third-world country with menstrual supplies she would not otherwise have, I'll answer that survey ten times!
I don't care if some people refer to it as "Bleeding-heart investing," If I'm earning a good return and P& G is using their money and influence to hire more women, promote women to management, and address global and environmental issues, I'm all in on that investment. I get two things out of the investment, I get a good return on my investment, and I have the opportunity to help someone else with that investment as well. So, I do not see anything negative in that!
Our world needs more companies willing to create gender equality within their company and help others locally and globally. Imagine the global impact if lots of companies adopted this philosophy!
These areas of gender lens investing focus on investing in business loans and grants for female-based and owned businesses and establishes female education and mentoring opportunities.
You are looking at the what and how of the business before investing. First, how is a business doing financially, its potential growth. Then, looking at the business strategy: how is the financial and human resources department committed to gender equality, the businesses structure, culture, policies, and the work environment. Lastly, how are they using their data to track and monitor their success and failure?
In truth, gender lens investing is no different from how you would research investments in any other business or fund. The difference is in what the companies are doing regarding gender equality and the companies they do business with.
The Importance of Gender Lens Investing
Previously I spoke of the gender gap referring to wages, women as leaders, etc., essential in closing the gap. Still, gender lens investing also creates a positive benefit and outcome for female business owners and management.
Studies have shown that these outcomes become the strength and long-term effects of the business's investment. These effects are seen in the following ways:
Female-owned and managed companies with female executives on their boards repeatedly outperform those who do not have females in management.
Representation for women in the global workforce is poor at best when 50% of the world's population is female. This is a lot of untapped potentials that the world is losing out on!
There is strength in gender diversity – studies have shown that companies retain more employees who are motivated, more creative, and have more robust financial performance. Why wouldn't they? When you take attributes that make both sexes great employees, creative catalysts motivated by and for each other and the company. You're going to create a fantastic team. A team that can create immense revenue through a great product. What CEO and investor doesn't want a part of that?
Globally women are just starting to realize their purchasing power. Many companies are beginning to realize this and capitalize on this corner of the market (increasing daily). Women are learning and actively investing in women-owned companies and companies that offer female-based products.
If you are an up-and-coming entrepreneur, your future success will be affected by gender lens investing. It is in the entrepreneur's best interest to consider all of these things and do business with these strategies in mind. The world is changing, and gender lens investing will help get it headed in a more inclusive direction.
Research Backs Gender Lens Investing Globally and in the US
Recent studies have shown that gender-diverse companies have a lower incidence of fraud, higher share price performance, and risk-management improvements. All three are sound reasons to invest.
Since 2018, eleven new gender lens funds have popped up. But, if you look at the S & P board seats, women make up only one-third of the seats; women hold only 6% of these seats.
Global gender lens investing is rapidly increasing with the amount of capital raised by private debt vehicles (distressed debt, real estate, banks, etc.). In addition, private equity and venture capital 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 seeing its benefits. But, unfortunately, their attitude towards gender-related investment lost them years of investment revenue. The saddest part of this is the loss to women socially and financial value loss to female-based Indian companies.
A recent study of international companies with male-female leadership balance has a higher company valuation by 25% than those with non-existent diversion. In addition, women-led start-ups were more successful financially than their peers in this study. Evidence suggests that female-founded companies have achieved higher revenue by more than two times as much per invested dollar than their male counterparts.
Male-based businesses have long turned a blind eye to need specific products, services, and business plans that women identify and capitalize on. As a result, this business brings healthy competition and a variety of goods and services that were not available before.
In India, the female-based business has seen growth in many sectors, but none more than female goods and services from healthcare start-ups offering breast screenings to lingerie (that is quite taboo in India) by changing how it can be obtained. The effects of this are women learning to love their body types, build self-worth, and increase their confidence.
Sheroes, India's social network strictly for women, gives 16 million women a place to speak of common issues and challenges. Offers female products, mental health services, and short-term loans provided by non-banking institutions. They have come very far in just a short time.
Unfortunately, Indian investors aren't taking advantage of all that gender lens investing offers. 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 these successful companies to choose a good gender lens investment.
Creating More Global Gender Lens Investing
Gender lens investing took a big hit during the pandemic, after a 4.2%loss of female employment between 2019 and 2020, while men saw a 3% loss. No doubt, women staying home with their children during the pandemic accounts for much of this.
Before the pandemic, the 2X Challenge, an initiative launched during the G7 summit in 2019, began using 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.
They have given over 200 projects to businesses that have qualified to receive the monies in the last three years. In the previous twelve months, the projects in sub-Sahara Africa have quadrupled.
Latin American has received the most funding. They are currently 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 micro finance institution, creating access to micro credits for 730,000 female entrepreneurs.
Since the Covid emergence, gender lens investing has made up only 2% of all investments, causing 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. The belief is 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. If you are serious about Gender lens Investing, this is a fantastic place to start. Find them at https://thegiin.org/gender-lens-investing-repository
If you are interested in learning more about investing through the 2X Challenge or are need financing through their Initiative, find them at https://www.2xchallenge.org
If you're looking for more Thoughts of a Random Citizen, head to the podcast section. You will find some fascinating podcasts and other information.