Turning the tide on Canada’s funding gap together

06 October 2022 by Janet Bannister, Jill Earthy, Tuyen Vo.
Three women entrepreneurs talk about funding gap

Janet Bannister is a Partner at Real Ventures, Jill Earthy is CEO of InBC Investment Corp, and Tuyen Vo is Head, Technology and Innovation Banking, at National Bank. In this article, they take a deeper look at the funding gap women entrepreneurs face.

The time for debating the funding gap is over. The conversation is picking up steam, and solutions are emerging. But across industries, start-ups founded exclusively by women still receive less than 3% of total funding, as cited in a recent study . The challenge is how to navigate this complex and deep-rooted cultural issue to pave the way for real change. The funding gap impacts us all. But together, we can find solutions. That’s our only way forward.

What is the funding gap, and why does it matter?

The funding gap is the difference in funding granted to women and men entrepreneurs. This inequality affects start-ups at every stage of development and makes it harder for women to innovate, share their unique talents and outlook and, ultimately, contribute to economic growth. According to the Government of Canada, advancing gender equality and women's participation in the economy could add up to $150 billion in GDP.

The situation is slowly improving

We can hope for a more equitable future when it comes to funding. People are speaking out to raise public awareness of inequality, and the number of women founders is increasing: 50% of online businesses launched between 2016 and 2018 belonged to women and 38% of Canadian entrepreneurs are women.

As the public becomes more aware of the value of women-led businesses, the necessity of making funding available is becoming self-evident. New funding solutions for business women are becoming available. Accelia Capital, for example, aims for diversity, performance, and impact by powering innovative businesses and accelerating women's leadership in the tech industry.

Furthermore, there is increasing pressure on large venture capital funds to create more diverse portfolios with a higher percentage of woman-led businesses. Between 2014 and 2019, 90% of venture capital investment deals went to companies founded exclusively by men. This is incompatible with the ESG values and commitments of most venture capital firms; a change is in order!

We're starting to see more women in decision-making roles, which indicates that we're on the right track. The 2021 Osler report revealed that 72% of S&P/TSX 60 companies have adopted targets for women directors, although only 32% of TSX-listed companies have done so. Similarly, the 2021 State of Diversity report from the CVCA reports that venture capital has made significant gains in women's representation at the senior leadership level; there has been an increase of 4.2% to 8.4%, depending on the data considered. It's another step in the right direction.

Every voice counts

In Canada, funds dedicated to women entrepreneurs have a huge impact on women-led businesses. But this assistance is not enough to counterbalance the weight of well-established venture capital funds. It shouldn't be exclusively up to women to fight for equity in the entrepreneurial world. To ensure real change, the business world as a whole needs to get involved and work on achieving greater balance. It's not enough for women to take action and help other women. There needs to be an investment in women entrepreneurs and a commitment to promote women's leadership.

Bridging the gap together

There can be many obstacles on the road to equitable financing of women entrepreneurs. Although this topic is being discussed more frequently and people are becoming aware that change is necessary, it's clear that some of these roadblocks are complex and deeply rooted in our culture. By adopting a new mindset and fostering diversity in the business world, we can all contribute to effecting long-term change. Where should we start?

Making progress a priority

Most people agree that equitable, diverse representation is needed. Companies across all sectors will need to play their part and take a position that promotes funding equity.

InBC Investment Corp, a new provincial crown corporation in British Columbia, is a great example of how this winning mentality can be implemented. InBC manages a $500 million investment fund with a triple objective of generating financial returns while also achieving social and environmental returns. This mandate drives all of its operations and investment decisions. This is not insignificant. It demonstrates a real commitment to integrating diversity, equity and inclusion into all decision-making processes.

Countering unconscious bias

Real Ventures also understands how diversity can help us seize business opportunities, and this vision is reflected in the team and in its processes.

By playing a leading role in the start-up community, especially in women-focused events, and including women-led projects in its portfolios, Real Ventures is sending a clear message: it truly welcomes women founders and their ideas.

Real Ventures has built a team that is committed to diversity, and created an internal system that ensures all points of view are given an equal voice and everyone understands how different experiences and perspectives enrich the conversation. The firm has updated its investment process to mitigate unconscious bias, ensure all companies are evaluated based on the same criteria, and allow investment specialists to share their point of view in an open, equitable manner.

Highlighting women's success

As a society, we need to redefine our vision of a "successful entrepreneur." We need to highlight visionary, daring founders who break the usual mold. For example, we can start eliminating gender stereotypes by talking up successful women entrepreneurs and promoting them as role models and mentors across all industry sectors.

We need to foster widespread adoption of this more realistic vision of who can be an entrepreneur across society: in banks and investment firms, in media and advertising, and even in the cultural sphere through better representation in movies, TV shows and documentaries.

If we help women believe in themselves and their dreams, they'll be more likely to launch their own businesses. Even established women business owners could get inspired to grow their business and explore new opportunities. Lastly, this collective effort may encourage financial decision-makers to invest in women entrepreneurs.

The more common it becomes to see successful women entrepreneurs, the more women will enter the business world. And the wheel will keep on turning as these companies invest in other companies, creating a more diverse pool of investors.

Putting principles into practice

These days, for venture capital funds to stand out—to add value, build a strong reputation and attract and retain talent—it's not enough for them to say they promote equity. They need to prove it. Their decision-makers need to put their money where their mouth is by rolling out transparent processes to ensure diversity, equity and inclusion. When firms demonstrate that they believe in funding equity, they send a clear message and give a powerful example, contributing to the push towards real change.

Smaller funds also have a role to play in deciding where they invest their money. If they value equity and realize how profitable it can be, they will invest in companies that promote women.

In conclusion, bridging the funding gap is much more than a moral or social obligation. It represents an underestimated opportunity for investors, the economy and society as a whole. Individuals, groups and companies need to work together to raise awareness, promote women's success and lead the way towards a more equitable funding approach.

Written by:

Janet Bannister

Partner at venture capital firm Real Ventures, Janet is extremely active in the Canadian tech ecosystem, serving as Co-Chair of C100 and sitting on several boards. In 2004, she launched kijiji.ca and grew it to become one of the most visited websites in Canada.

Jill Earthy

Jill is a forward-thinking business leader with a drive to create an inclusive innovation ecosystem. Currently the CEO of InBC, she’s held multiple leadership positions including CEO of WeBC, Head of Female Funders and Chief Growth Officer of FrontFundr.

Tuyen Vo

A seasoned executive in commercial banking, corporate finance and technology, Tuyen heads Technology and Innovation Banking for National Bank and has been working with successful entrepreneurs for nearly 20 years. Tuyen also serves on the Bank’s Inclusion and Diversity Council as the Women segment Lead, and has a seat on the LPAC of Accelia Capital.

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