Bridging the Finance Gap for Women Entrepreneurs

10. Australia: Policy insights on growth financing

Professor Naomi Birdthistle
Griffith University

Professor Patrice Braun
Federation University Australia

Associate Professor Antoinette Flynn
University of Limerick

Professor Robyn Eversole
Bucknell University

Background

Australia has a vibrant entrepreneurial ecosystem with over 406 000 new ventures created in 2023, attracting USD 2.5 billion in investment. However, this marks a significant decline from 2022, which saw USD 5.4 billion invested in over 470 000 start-ups (KPMG, 2024[1]; Statista, 2024[2]). Women are increasingly involved in entrepreneurship, with a 95% rise in women founders between 2016 to 2021, compared to a 45% increase for men founders (Deloitte, 2022[3]). Yet, women-led enterprises in Australia secured only 0.7% of start-up funding, despite their potential to generate more revenue per dollar invested than men-led enterprises (Deloitte, 2022[3]). An inherent gender bias against women continues to impede access to capital for women-led enterprises, with women founders in rural and regional areas facing even greater obstacles. These include poor digital communications infrastructure (Saavedra, 2024[4]) and unequal access to financial and institutional resources, as ecosystem supports are concentrated in Australian capital cities (Eversole et al., 2019[5]).

Policy issue: Financing growth (public and private)

Evidence shows that government policies are important to stimulate more gender-inclusive entrepreneurial ecosystems (Eversole et al., 2019[5]; Cooke and Leydesdorff, 2006[6]). Yet, recent policy reports overlook the need to invest in women’s entrepreneurship in general and women-led start-ups and growth in particular (Australians Investing in Women, 2023[7]; Commonwealth of Australia: Department of the Prime Minister and Cabinet, 2023[8]). An existing funding avenue for women entrepreneurs at the federal level is the Australian Government's Boosting Female Founders (BFF) initiative, which was launched in 2018 (OECD, 2021[9]). It supports women-led start-ups to launch, scale and expand globally by providing grants ranging from AUD 100 000 to AUD 480 000 to women founders, including Indigenous, migrant, refugee and women entrepreneurs that have a disability (Department of Industry, 2018[10]). The initiative operates on a matching funding basis, requiring applicants to have committed funds before applying for grants. In its third round, the programme has faced challenges including “poor communication, data leaks and significant delays in financing” (Jones, 2023[11]). This has proven to be an obstacle for many women-led start-ups

Various state governments also have initiatives to support the growth of women-led enterprises. In Queensland, the Backing Female Founders Programme (BFFP) oversees the Female Founders Co-Investment Fund, which offers grants of up to AUD 200 000 to businesses founded by women and where women hold more than 50% ownership (Advance Queensland, 2024[12]). The grant also operates on a matching funding basis, providing AUD 1 for every AUD 3 secured in investment. In Victoria, which boasts an AUD 103 billion start-up ecosystem (LaunchVic, 2024[13]), the Alice Anderson Fund (Premier of Victoria, 2023[14]), named after a pioneering female mechanic and entrepreneur, is LaunchVic’s AUD 15 million sidecar fund, which is a separate investment fund established by LaunchVic to increase the funding pool available to Victorian women (LaunchVic, 2024[15]). The fund co-invests between AUD 50 000 and AUD 300 000 in early-stage deals and has supported 20 start-ups in its first year, with 85 cents on the dollar taken as equity, providing a boost to women-led start-ups (Premier of Victoria, 2023[14]; Jones, 2023[16]). Growth-oriented women-led enterprises still experience a considerable investment gap, as the State of Victoria provides one-third funding. In contrast, two-thirds of the capital must be provided by private investors (LaunchVic, 2024[15]).

Women are less likely than men to seek or obtain private capital, in particular, venture capital (VC), due to documented gender discrimination, homophily, ecosystem and structural differences between men- and women-led enterprises (Brush et al., 2018[17]; Gompers et al., 2022[18]; Li et al., 2023[19]). In Australia, as elsewhere, investors’ unconscious gender biases lead them to prefer business pitches presented by men, even when the content is the same (Wade Institute, 2019[20]). Biases are clearly evident in the Australian VC landscape, where only four of the top ten VC firms have women partners (Wade Institute, 2019[20]) and only 0.7% of the total AUD 10 billion in VC in 2022 went to solely women-founded companies (the global average is 2%) (Deloitte, 2022[3]). Australia does, however, have three private VC funds that proactively focus on women entrepreneurs: Artesian, ALIAVIA Ventures and Scale Investors. Artesian has an AUD 100 million Female Leaders VC Fund that invests in high-growth start-ups led by women who are often overlooked by other VCs (Artesian, 2022[21]). The Artesian fund aims to rectify this market failure by supporting women founders with financial and strategic backing, leveraging their unique perspectives, unexplored business opportunities and under-utilised talent to achieve strong returns. Although ALIAVIA Ventures is based in California, it focuses on early-stage ventures in both the US and Australia that are founded by women; so far, they have made nine investments with 27 investors from across both countries. Scale Investors is Australia’s first network of women angel investors that invests in empowering women entrepreneurs. It has so far invested AUD 20 million into 46 businesses which now have a market value of over half a billion (Scale Investors, 2024[22]).

Crowdfunding is an alternative avenue of funding for early-stage and growth-oriented businesses. Australian growth-oriented businesses with more than AUD 1 million in revenue accounted for about 50% of all successful Australian crowdfunding offers in 2022, which is a 103% increase compared to 2021 (Birchal, 2023[23]). Equity crowdfunding is becoming a core part of the funding landscape in the Australian start-up ecosystem, though it is narrowly concentrated in New South Wales (Rossi, Vismara and Meoli, 2019[24]). Women-led businesses account for 11% of the campaigns, valued at 6% of the total funds raised in 2022 (Cut Through Ventures and Folklore Ventures, 2024[25]). Men-led enterprises comprised 70% of all successful crowdfunding campaigns in 2022 and accounted for 76% of the total funds raised (Cut Through Ventures and Folklore Ventures, 2024[25]). Crowdfunding has been criticised for its lack of transparency at the expense of the investor, resulting in recent calls in Australia for legislative change to protect investors and underscore the quality of crowdfunding (Cut Through Ventures and Folklore Ventures, 2024[25]). To combat the weak crowdfunding outcomes for women, specific women-focused crowdfunding platforms have been introduced. For example, Lift Women, Australia’s first women-focused crowdfunding platform, was one of the early recipients of LaunchVic Alice Anderson sidecar investment fund after receiving backing from two insurance companies. The Alice Anderson sidecar fund has had a positive impact on women-led enterprises supporting the creation of more than 120 jobs by women-led start-ups ─ the majority of which have been taken up by women.

Conclusions

While there is a rise in the number of women founders, their growth is still outpaced by men-led firms (Premier of Victoria, 2023[14]). Women founders’ continue to face access to finance barriers in Australia, both in traditional arenas and new financial platforms. In particular, improved access to external equity finance is a critical factor for success. There is a need for more practical initiatives to address these issues. Existing matching funding programmes do not fully address the gender, racial, geographic and social biases in the Australian investment market. Women-led start-ups are also missing out on the valuable advice, expertise and other (in)tangible supports for business development and acceleration that are often paired with external finance. Key potential policy action steps include raising awareness of the economic benefits of investing in growing women-led enterprises across the nation, incentivising private investors to help close the investment gap and prioritising women’s entrepreneurship in future policy and programme strategies.

References

[12] Advance Queensland (2024), Backing Female Founders Program, https://advance.qld.gov.au/grants-and-programs/backing-female-founders-program (accessed on 25 September 2024).

[21] Artesian (2022), Female Leaders VC fund: Strategy, https://www.artesianinvest.com/female-leaders-vc-fund (accessed on 25 September 2024).

[7] Australians Investing in Women (2023), Empowering giving for a fairer future: Annual Report 2023, https://www.aiiw.org.au/wp-content/uploads/2024/02/AIIW-Annual-Report-2023-FINAL-single-page.pdf (accessed on 25 September 2024).

[23] Birchal (2023), CSF Yearbook 2022, Birchal Pty Ltd.

[17] Brush, C. et al. (2018), “The gender gap in venture capital- progress, problems, and perspectives”, Venture Capital, Vol. 20/2, https://doi.org/10.1080/13691066.2017.1349266.

[8] Commonwealth of Australia: Department of the Prime Minister and Cabinet (2023), A 10-year plan to unleash the full capacity and contribution of women to the Australian economy, https://www.pmc.gov.au/resources/10-year-plan (accessed on 25 September 2024).

[6] Cooke, P. and L. Leydesdorff (2006), “Regional development in the knowledge-based economy: The construction of advantage”, Journal of Technology Transfer, Vol. 31/1, https://doi.org/10.1007/s10961-005-5009-3.

[25] Cut Through Ventures and Folklore Ventures (2024), The state of Australian startup funding, https://2023.australianstartupfunding.com/ (accessed on 25 September 2024).

[3] Deloitte (2022), Accelerating women founders: The untapped investment opportunity, Deloitte Touche Tohmatsu.

[10] Department of Industry, I. (2018), Boosting Female Founders Initiative Discussion Paper, Australian Government Department of Industry, Innovation and Science, https://consult.industry.gov.au/science-commercialisation/bff design/supporting_documents/BoostingFemaleFoundersDiscussion Paper.pdf (accessed on 25 September 2024).

[5] Eversole, R. et al. (2019), “Towards a typology of supports for enterprising women: a comparison of rural and urban Australian regions”, in Bullough, A. et al. (eds.), Fostering high-growth women’s entrepreneurship: Programs, policies and practices, Edward Elgar: Cheltenham: UK, https://doi.org/10.4337/9781788118712.00010.

[18] Gompers, P. et al. (2022), “Gender Gaps in Venture Capital Performance”, Journal of Financial and Quantitative Analysis, Vol. 57/2, https://doi.org/10.1017/S0022109020000988.

[16] Jones, T. (2023), A few large raises doesn’t mean the current funding for women-led startups in Australia is acceptable, https://www.smartcompany.com.au/finance/funding/current-funding-women-startups-australia-unacceptable/ (accessed on 25 September 2024).

[11] Jones, T. (2023), Completely useless: Boosting Female Founders program continues to hold back startups, https://www.smartcompany.com.au/startupsmart/news/boosting-female-founders-round-three-new-delay/ (accessed on 25 September 2024).

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[13] LaunchVic (2024), Our ecosystem, LaunchVic, https://launchvic.org/our-ecosystem/ (accessed on 25 September 2024).

[15] LaunchVic (2024), The Alice Anderson Fund, LaunchVic, https://launchvic.org/investment/the-alice-anderson-fund/ (accessed on 25 September 2024).

[19] Li, J. et al. (2023), “Reflecting upon the Boundary Conditions of the Gender Gap in Entrepreneurial Finance: A Literature Review and a Research Agenda”.

[9] OECD (2021), Entrepreneurship Policies through a Gender Lens, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/71c8f9c9-en.

[14] Premier of Victoria (2023), Putting Women Entrepreneurs on a Fast Track to Startup, https://www.premier.vic.gov.au/putting-women-entrepreneurs-fast-track-startup?utm_source=substack&utm_medium=email (accessed on 25 September 2024).

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[4] Saavedra, A. (2024), “The role of female-only business networks in rural development: Evidence from NSW, Australia”, Journal of Rural Studies, Vol. 106, https://doi.org/10.1016/j.jrurstud.2024.103236.

[22] Scale Investors (2024), About Us, Scale Investors, https://scaleinvestors.com.au/ (accessed on 25 September 2024).

[2] Statista (2024), Number of new business entries in Australia from financial year 2014 to 2023, Statista, https://www.statista.com/statistics/882101/australia-number-new-business-entries-by-industry/ (accessed on 25 September 2024).

[20] Wade Institute (2019), Women & Entrepreneurship: The state of women’s representation in the Australian start-up ecosystem, why we need to improve it, and how to get there, https://wadeinstitute.org.au/wp-content/uploads/2019/04/Women_and_Entrepreneurship%20report_small.pdf (accessed on 25 September 2024).