FVF for SMEs: Innvotec Empowers female entrepreneurs with new venture fund

July 20, 2020

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What's going on here?

Innvotec, a fund manager, recently launched the Female Ventures Fund (FVF). FVF will invest in small-to-medium-sized businesses founded by women and provide financial support for the first 10-12 years of the company.

What does this mean?

Innvotec is an alternative investment fund manager, it pools capital from investors and invests it in a way that achieves maximum returns. Currently, only 1% of total venture capital (early-stage) investment goes to female-led firms in the UK, with the rest going to mixed-leadership (10%) and all-male-led (89%) companies. FVF aspires to shrink this gap and encourage more women to set up their own businesses by increasing their ability to secure funding. Similar funds have been launched in the past, such as that of RED Capital Partners, which set aside EUR 50m in 2018 for investment into European technology companies founded or led by women.Ā 

Aside from the social benefit, the new fund also aims to maximise the often excellent returns of female-led businesses. A 2018 Boston Consulting Group study found that women-led startups delivered more than double the returns of male-led startups. A separate study found the failure rate of women-led startups across Europe to be lower than that of male-led startups.

What's the big picture effect?

The benefit of a fund such as FVF is that it encourages investors to actively look for women-led investment opportunities. This increased demand may, in turn, counteract biases that hinder women-led fundraising outside traditionally ā€˜feminineā€™ sectors such as wellness and fashion, as well as embolden women entrepreneurs to ask for more generous terms. A growing pipeline of businesswomen should also gradually increase networking opportunities and create new role models for the next generation of female entrepreneurs.

Moreover, smaller funds, such as FVF, are open to retail and high-net-worth investors in addition to the usual large institutions (pension funds, sovereign wealth funds). With greater publicity, the venture capital industry may therefore see a new stream of commitments come in from passionate individuals with a personal stake in furthering womenā€™s equality.

Nonetheless, funding earmarked for women is unlikely to be a panacea for gender equality.Ā  As Alice Hu Wagner, Managing Director of Strategy & Economics at the British Business Bank points out, the move risks women being inserted onto boards as ā€œtokensā€ and does not address the wider networking issues faced by women. Additionally, women are often under-represented in the sectors whose companies attract the majority of venture capital funding, such as tech. The result is that only 5% of pitches heard by venture capitalists currently come from an all-female-led company.Ā 

It is therefore unsurprising that the FVF only hopes to invest around Ā£10m in female-led companies in 2020. Other recent woman-focused funds, such as the one closed in July by Boston-based Victress Capital, are similarly small ($22m). Across the venture capital industry, only 10% of funds are earmarked for women.Ā 

These issues suggest that the impact of any new fund on female-led business will be positive but muted; however, it is a strong step forward in giving female-led business its rightful support.

Report written by Darinka Lipovac

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