Empowering Women: Reaching a Helping Hand Across the 'Pioneer Gap'

By Marta Maretich, Chief Writer, Maximpact

Women’s financial empowerment has been a hot topic in recent months. There’s a definite (deserved) buzz around gender-lens investing and its potential to make more of impact capital. Yet, while the gender lens approach is an exciting step forward for women’s financial empowerment, it isn’t the whole story.

Impact investing isn’t an island anymore; it’s now becoming part of the financial mainland. By the same token, investing in women happens within the much larger context of the global financial markets on the one hand and the developing impact investing industry on the other.

Looking more deeply into the subject of women and the flow of impact capital reveals a number of areas where the practice of gender lens investing intersects with larger issues in the impact sector. One of these is the sticky issue of supporting impact businesses as they struggle through the“pioneer gap”—the tricky mid-stage between startup and market viability.

It’s now clear that women business leaders are a good bet in both financial and impact terms. But when it gets down to choosing investments, practical questions remain. Which female leaders are we really talking about? And which businesses, at which stage?

Doing good vs. making money

To make the right decisions when it comes to gender lens investing, investors and funds need to come to terms with the fact that the impact investing sector is still a divided marketplace. On the one hand are businesses whose main aim is to do good, especially for the poor; on the other are those whose central goal is market-rate returns. The gender lens, while it helps bring focus in many ways, may not pick up this fundamental difference.

So at which end of the spectrum should we put our capital if our goal is to empower women? The answer is both—plus more in the middle.

There are good options for female-centered investors who want their capital to have the most impact for poor and underserved women. Veteran social financiers like Root Capital and Village Capital have reliable track records. Incubator programs, contests and honors for women social entrepreneurs have proliferated across the social benefit finance sector. The enterprises they work with are typically small seed-stage ventures, run by individuals or small teams. They often use microfinance models and, with notable exceptions, they are often based in the developing world.

On the other end of the spectrum are more impact investments in traditional areas like large-scale infrastructure, renewable energy, real estate and commodities. Today, the majority of the more than $4 billion of impact capital is invested these kinds of businesses in developing markets. Very few of them are led by women (as a benchmark, women CEOs run only 4.2 percent of Fortune 500 companies; only 16 percent of directors are women). Some of the “new” impact industries, especially tech firms, are among the most male-dominated. And while these businesses may bring benefits to women in a broad sense, their positive impacts tend to bypass the poorest and neediest.

Targeting the missing middle

There’s nothing necessarily wrong with any of this; diversity is one of the strengths of the impact investing sector and the picture is always changing as we learn more. Yet the division points, once again, to a nagging sector-wide issue: the lack of mid-stage businesses with both strong impact credentials and growth potential. This is a crucial problem for female-friendly impact investors.

Recent research has identified some of the factors behind this “pioneer gap.” The main problem is that it’s very difficult for impact businesses to scale up, especially in developing countries where they lack basic market infrastructure, skilled workers and the right kind of capital. Often, there’s support from incubators at the seed stage, but this evaporates as the enterprise gets bigger and its needs become more specialized and complex. Entrepreneurs, whether male or female, struggle to provide leadership at this stage, often lacking key skills or access to expertise or networks that can help them. Many promising impact businesses die here.

For female-focused investors, there’s another issue. The abundance of seed-stage female-led businesses tends to divert attention away from the shortage of investable female-led businesses at the middle stage. The fact remains that many small seed-stage social enterprises, though worthy, will never scale up; some can’t, some simply don’t want to. Yet impact investors—those who are playing for real—need to place capital in businesses that grow, or at least have growth potential.

The disconnect between seed-stage social businesses and growth helps create a hole in the middle of the marketplace where some of the most dynamic investment opportunities should be. More importantly, it can mean that women-centered investments don’t have the transformational effect they should have. Investing in seed-stage women entrepreneurs may bring local benefits, but unless they go on to build organizations and scale their businesses, they will never enter the mainstream global marketplace or reach more beneficiaries. This limits their scope for impact.

Growth-friendly and female-friendly, too

The problem of the missing middle is slowing the development of the impact sector, but it also creates an opportunity for investors and funds. Those who want to focus their capital on women can multiply the benefit of their investments by targeting mid-stage female-led businesses with growth potential.

• Make supporting mid-stage impact businesses a priority in your woman-centered portfolio.


• Analyze the portfolio: How much investment is going to mid-stage businesses? How much capital is backing intermediaries and accelerators who work with mid-stage businesses?


• Partner with impact accelerators and intermediaries who specialize in supporting businesses in the pioneer gap; LGT Philanthropy’s Smiling World Accelerator Program is one example.


• Consider women-friendly investments with more modest financial returns: five percent per year or lower. Modest return goals mean mid-stage businesses can benefit from capital without being squeezed by investor expectations.


• Create a woman-centered fund backed by philanthropic capital. Rather than channeling philanthropy dollars away from good causes, use them as capital for supporting mid-stage businesses in the pioneer gap, as Acumen does.


• Build blended investment funds that combine capital with philanthropic or technical support funding for mid-stage businesses. Sophisticated impact funds, such as the Grassroots Business Fund, are increasingly using models that blend philanthropic with impact capital.


• Look outside the social benefit sector for scalable female-led businesses that have positive impacts. Mainstream investments in areas like health, renewable energy, accessible finance, education and biomimicry are all areas where women business leaders are making a mark as well as a contribution. Open deal sites like Maximpact have a range of different kinds of deals in different sectors.

Using a gender lens goes some way toward encouraging investment choices that benefit women. By looking more deeply at the nature of these businesses—and meeting their needs at each point in their growth cycle—investors can do even more for women, especially those making the difficult shift from entrepreneur to organizational leader. At the same time, they can help build the impact marketplace by nurturing businesses through the pioneer gap. It’s a win-win-win situation for women, investors and the marketplace.

Marta Maretich is Maximpact’s Chief Writer and Blog Editor. Maximpact is a free global portal for the social, impact and sustainability sectors. It operates as a secure web-based listing service that allows sustainability, philanthropy and CSR professionals, as well as entrepreneurs, intermediaries, and funds to share information about initiatives and impact investment deals, online. For more information on the platform or to review latest impact projects visit: www.maximpact.com. This article first appeared on Maximpact's blog.