Enhancing
the post-pandemic recovery through supporting women and small businesses
No
aspect of civilization has been spared by the COVID-19 epidemic, which has had
a devastating impact on global populations, healthcare institutions, and the
labour and financial markets. From a business perspective, it has
disproportionately affected female and ethnically diverse business owners and
entrepreneurs. According to a recent survey by Global Entrepreneurship Monitor,
for instance, nearly half of all female business owners in high-income nations
reported business closures, and women were 20% more likely than males to report
closures.
Non-white
business owners had a number of extra difficulties, such as a concentration in
sectors that were vulnerable to change, such as retail, lodging and food
services, personal care, and laundry services, among others. The disruption
served to compound unfavourable outcomes and closures because these diverse
entrepreneurs' financial standing already lagged below that of their white
peers prior to the epidemic.
Access
to funding for diverse businesses, including women
A
2019 study indicated that 61% of female founders choose to self-fund their businesses.
The idea of restricted access to funding is supported by a thorough examination
of women entrepreneurs in the IT sector. According to a recent TechCrunch
assessment of all venture investments, only 10% of all funds went to
initiatives with female backing, with the other 90% going to ventures with male
backing.
Black
business owners' limited access to financing is made worse by a systemic
exclusion from venture capital and traditional banking. They are more likely to
have their bank loan applications denied and, if approved, to have more
stringent limitations placed on them. Black and women business owners are
unable to operationalize and scale their enterprises because of the unequal
participation in financial institutions.
A
range of new abilities and tasks must be developed in order to launch a new
firm. In addition to assisting early-stage businesses with accessing new
markets, navigating available finance, implementing cutting-edge technology,
and learning managerial skills, mentoring may also provide the ecosystem and
essential support systems for starting a business.
Despite
the necessity for mentorship in the entrepreneurial world, a recent study found
that access to mentorship networks was much less common for women and diverse
entrepreneurs.
implicit
bias in consumer behaviour
According
to a US study, diverse entrepreneurs' businesses, particularly those owned by
people who identify as Black or African Americans, are sadly underutilised.
Despite making up 2.2 per cent of employee-run enterprises in the US,
Black-owned companies only bring in 0.33 per cent of the country's overall
income.
The
limited use of Black- and women-owned firms may be caused by a number of
causes, including a lack of resources to sell products and services to
important target populations. However, evidence points to a more sinister
factor at work: unfavourable biases related to diverse business ownership and
their subsequent impact on consumer purchase decisions.
Female
and ethnic business owners need an egalitarian starting point rather than
favouritism. We conducted interviews with more than 20 diverse founders and
investors to better understand why supporting diverse entrepreneurs is
essential in the post-pandemic era. These discussions highlighted advantages
that go beyond monetary gains.
Despite
having limited funding, capital generation efficiency
According
to our research, because they have less access to finance, women and diverse
entrepreneurs tend to gravitate toward non-traditional funding sources. The
first French-Caribbean natural cosmetic company, Kadalys, which uses
antioxidants from banana trees, was founded by Shirley Billot. She brought
attention to the funding difficulty faced by Caribbean companies. Investors
frequently see this area as a tourism destination rather than an
entrepreneurial hotspot. She recruited nearby banana farmers to become company
shareholders in order to raise money while also giving back in order to close
this cash gap. Access to financing is also increased by other sources like the
Black Opportunity Fund and the Women's Funding Network.
The
panellists on the LEAP by McKinsey podcast cite a significant indicator as the
dedication to building enterprises that have a positive influence on society
and the economy. Carla Robinson founded Canary Tech in the healthcare industry
to increase marginalised communities' access to care through remote medical
assistance. Her desire to assist elderly Black people who require ongoing
assistance managing chronic diseases like diabetes sparked this enthusiasm. By
addressing the gaps within these groups, solutions can be developed that go
beyond the primary targets.
Regardless
of portfolio performance, familiarity or comparable ethnic and gender
demographics seem to influence who receives financing from private sources,
businesses, or venture capital. Due of the underrepresentation of women and
minority entrepreneurs in the VC industry, these business owners have recently
decided to start their own funds. According to a Deutsche VC survey, 140 new
funds were founded by women between 2017 and 2020, an increase of 104% from
2010 to 2016. 16 new Black and Latino-led funds were introduced during that
time, a 41 per cent increase.
Supporting
women and other types of entrepreneurs
While
giving women and varied entrepreneurs crucial networking opportunities as they
navigate the early stages of new business operations, the increased presence of
women and diverse fund founders should attenuate some of the demographic and
cultural biases in the allocation of financing.
Women
and other entrepreneurs of colour also provide a special viewpoint on
underserved market niches. Recent studies suggest that if companies
concentrated more on producing goods and services that were specifically
tailored to their needs and made a concerted effort to serve communities that
have historically been excluded from mainstream outlets, these demographics
might be willing to change their brand loyalty.
In
order to take corrective action to lessen the effects suffered by marginalised
populations and to aid in their recovery in a post-pandemic environment,
investing in women and members of varied ethnic minorities is essential.
Investors need to pay attention.