Female Entrepreneurs Poised for Boost From New Tech, Regulation, Interest in ESG

Female-led companies made meaningful gains in 2021, but the work of using digital technology to level the playing field for women entrepreneurs is just starting its ascent, dealing not only with classic obstacles facing women in business but strong economic headwinds.

The May/June 2022 report “Female Entrepreneurs and Technology: Building New Markets and Better Opportunities,” a PYMNTS and Payoneer collaboration, noted that the first three quarters of 2021 saw $40 billion raised by female-owned startups, calling it “a mere fraction of the $239 billion in venture capital (VC) invested over the same period, [but] double the amount raised by female-owned startups in all of 2020 and 2019, signifying women’s rapidly growing presence in the traditionally male-dominated business world.”

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In a conversation with PYMNTS, Faith Frank, head of social impact and ESG at Payoneer, said that while much progress was made last year, business formation and leadership among women and people of color is still lagging significantly behind the broader entrepreneurial community.

“The [initial public offerings (IPOs)] of 2021 definitely saw progress as far as female-led companies, [but] it’s obviously not even close to the male-led companies,” she said, adding venture capital firms including Female Funders Fund, Ellevest and Rethink Impact are focusing solely on funding women and people of color.

At present, the amount of progress that can be made right now is unclear. Frank said IPOs have slowed down in 2022 so far — after more than doubling in 2021 over 2020. However, venture capital dry powder grew in the first quarter of 2022, and the increasing importance and interest in environmental, social and governance (ESG) issues can help female- and minority-led companies get funding.

A Carrot-and-Stick Approach

Waiting for the current funding drought to cycle back to the numbers and types of deals seen last year, Frank told PYMNTS that serious gains remain to be made over those historic highs.

Part of the problem is a lack of legislation, especially in developing economies where opportunities are immense but meaningless without diversity protections.

Incentives coupled with regulations would be even more helpful. Frank said the Securities and Exchange Commission (SEC) put new rules in place around climate and ESG disclosures in May, and lenders are complying because it’s the law.

Borrowing from that, she said, “I think that if more legislation can be instituted around not just women but all different types of investors and all different types of entrepreneurs, that would help as well.”

Mentioning a House Financial Services Committee hearing in early July during which billionaire philanthropist and former Microsoft executive Melinda Gates, Ellevest CEO and Co-Founder Sallie Krawcheck and other business leaders testified about growing entrepreneurism for women, Frank said, “There’s potentially some legislation coming. I don’t know how long it’ll take.”

See also: Digital Platforms Close Funding Gaps for Female-Founded Firms in Finance, Tech

Incentivizing Fairness

Looking at World Bank findings that female entrepreneurs are about twice as likely to have their loan applications rejected as males, Frank said she is nonetheless hopeful about the future.

“Some would say that’s being driven by the people who are making the [lending] decisions, and that the people who are making the decisions are much more male than female,” she said. “Putting more women and people of color in those positions [to be making] the decisions is going to help as well.”

A newcomer to the FinTech world, Frank said she joined Payoneer because she was attracted to the company’s mission of creating opportunities for entrepreneurs all over the world.

“I’m helping to build the social impact part of the company and our profile, and it’s going to be built around that mission,” she said. “We want to provide opportunities for women, for people of color, to help grow their businesses and reach this new height of success.”