Gender Smart | June 20, 2024

Transferring women’s wealth to women-led funds to build a more equitable economy

Najada Kumbuli and Stephanie Heller

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Guest Author

Najada Kumbuli

Guest Author

Stephanie Heller

A significant shift in generational wealth is occurring. A recent study estimates that by 2030, women are poised to control roughly $30 trillion in personal wealth, marking a significant increase from the estimated $10 trillion owned today. Over the next few years, more women will be in positions to influence where to invest and how to allocate capital. For organizations trying to reimagine more inclusive capital markets and investment ecosystems, this shift presents a turning point to help advance systemic change.

One of the areas where this change will be most impactful: Venture capital firms that are either led or founded by women. A recent study highlighted that women-led venture capital firms are three times more likely to invest in women entrepreneurs and notes that these investments have generated significantly higher revenue than their non-diverse-led peers. Furthermore, women entrepreneurs have the potential to unlock $2.5 to $5 trillion into the global economy and are more likely to reinvest into their families and communities, thereby being key contributors to poverty reduction

These findings are no secret and a great deal more has been written on the potential of investing in women. Yet, this segment of entrepreneurs has been historically and systematically excluded from early-stage investments and resources, receiving just 2% of annual venture funding. Diving deeper, this issue is compounded by two trends. The first highlights the dearth of women-led or owned venture capital firms in the US and Europe while emerging markets find themselves with practically none. The second shows that women-led funds have been hit hard with the fundraising slowdown

As compelling partners in the effort to close the financing gap for women entrepreneurs, women-led funds need support and stand to gain from systemic change as this generational wealth shift unfolds.

There is a unique opportunity to increase women’s leadership roles as institutional asset allocators, fund managers, and entrepreneurs. Funders, whether they are financial institutions, foundations, or investment advisors for high net-worth individuals, have a crucial role to play in empowering diverse fund managers, debunking prevailing myths, and paving the way for women’s financial advancement. 

Here are some of the actions that funders can take.

Find untapped opportunities

Funders must actively expand beyond their existing networks. Conduct desk research, interview stakeholders from different backgrounds, or proactively contact investment firms across professional platforms to learn more.

Following this method, Visa Foundation zeroed in on Bootstrap Europe, an investment firm that focuses on venture debt, an overlooked opportunity for Europe, and prioritizes responsible financing and sustainable growth for high-growth tech companies.

Diversify from the start

Research shows that the presence of women in senior management teams is correlated with higher returns. In Europe specifically, management teams mostly composed of women outperformed men-only teams by 9.3 percentage points. 

For example, Bootstrap Europe is one of a few women-led funds in Europe with a gender-balanced investment team that proactively looks to finance companies that have strong returns and focus on positive social impact. As a result, 100% of Bootstrap investments are in women and diverse-owned small businesses with less than 250 employees because of their significant role in accounting for more than half of jobs worldwide, thereby impacting all of us.

Prioritize funds with a deep societal impact

Generating attractive financial returns while contributing to social impact is possible. In the case of Bootstrap Europe, the focus on 4 key pillars – energy diversification, environment protection, innovation and sustainable growth, and health and wellbeing – ensures that innovation plays its part in resolving some of the most critical societal challenges. 

Such is the case with Kenbi, a homecare-focused health tech company co-founded by Katrin Alberding. Four years in, the home care healthtech startup is already among the top 10 private German players, employing over 1,000 nurses across West and East Germany, providing over 110,000 visits per month and 240,000 services on its hybrid online/offline platform, the first of such ecosystem approach in Europe. By providing a very useful service, Kenbi does good to thousands of patients and their families while capturing an immense €67 billion market opportunity growing to over €80 billion in Germany alone by 2030.

Another case study is that of EWA Capital, a venture capital firm in Colombia, that prioritizes both financial returns and positive social impact. For example, one of their portfolio companies is Bia, one of the first energy retailers with a platform that empowers business customers to take control of their energy consumption and costs. By using smart energy meters, the platform identifies energy efficiency opportunities and conducts in-depth analyses of consumption patterns. This proactive approach empowers its users to track their energy consumption performance and implement initiatives that result in a reduction of their energy bills. To date, 880 businesses are contracting Bia’s energy service with reports showing that clients are saving between 4% and 6% on their energy bill.

The empowerment of women in business requires deliberate efforts from asset allocators to investors and entrepreneurs. Making intentional efforts now can help pave the way for the anticipated wave of women investment leaders in 2030 and continue to create a more equitable and prosperous future.

Najada Kumbuli is the Vice President and Head of Investments at Visa Foundation.

Stephanie Heller is the Co-Founder and Managing Partner of Bootstrap Europe.