Why procurement is a critical enabler for women-led startups with high growth potential

This post is written by Vera P. Weill-Halle and Natalia Blokhina, co-founders of Brighter Ventures Inc.

• The problem: Procurement can leverage gender equality in the marketplace.

• Why it matters: Procurement is a powerful way to boost sustainable revenue increase for high-growth startups.

• The solution: Governments and corporations should create enabling environments to increase procurement from women-led businesses.

As the world emerges from the pandemic, women-led startups with high growth potential need more tailwinds to withstand the challenges on the economic horizon.

In June 2021 the economic leaders called upon governments to prioritize inclusivity, ensure that crisis recovery funds get into women’s hands to reduce their burden of unpaid caregiving, and strengthen support for better childcare and social services. In July 2021 the Generation Equality Forum adopted a Global Acceleration Plan to advance gender equality by 2026.

Why should this matter to women-led startups?

At the Forum, Procter & Gamble committed to advancing women’s economic justice through its global value chain by spending $10 billion on women-owned and led businesses through 2025 - 10 times the industry average. Actions such as this example from the world’s largest consumer products company should be acknowledged for helping open the path to real change for women entrepreneurs.

1. Towards a pandemic recovery for women

The pandemic caused a dramatic economic setback for women globally. Over 64 million women lost their jobs - particularly in retail, tourism, and food services. Women lost nearly $800 billion informal economy wages, with many leaving the workforce to provide unpaid child and family caregiving.

The disproportionately low representation of women in the labour force threatens the global economic recovery and weakens resistance to future shocks. In the startup ecosystem, only 2.2% of the venture funding goes to women-led startups. This further demonstrates that female entrepreneurs are not receiving the needed support to expand their business ventures.

A female entrepreneur multiplies the social impact of investment by extending benefits to her community. Low investment in their enterprises, traditional workplace constraints, lack of childcare, and unpaid caregiving challenges are formidable obstacles. Nonetheless, pandemic-driven changes to the traditional workplace are an opportunity for women and their allies to seize. A survey by McKinsey reveals a leap in technology use, creating a differentiating and permanent role in the revenue growth for companies. Workers want flexible workspaces too. A World Economic Forum survey of 29 countries found women, parents of school-age children, adults under 35, and those with higher levels of education and income desire them most.

The momentum behind office organisation can pave the way for women employees to pursue less traditional office arrangements and encourage women to establish their startups. Female entrepreneurs all over the world are eager to drive sustainable development, but they need capability building, infrastructure, and support from governments and corporations to realise their full potential.

2. Leveraging gender equality in the marketplace

Governments and corporations need to encourage cooperation with startups upstream and with supply chains downstream, as this is a powerful way to boost sustainable revenue growth for startups.

Some exciting initiatives are underway. The commitments made at the Generation Equality Forum require careful monitoring to ensure full implementation. UN Women, WE Connect International, Women's Business Enterprise National Council (WBENC) and the Women’s Forum for Economy & Society, and Procter & Gamble are meeting the challenge by supporting capacity-building of female entrepreneurs - developing the tools, definitions, and infrastructure needed in addition to driving collaboration across companies to advance these efforts.” The EU initiative to contribute to gender-responsive public procurement is also expected to be available next year.

This momentum is encouraging but, regretfully, women-led businesses earn less than 1% of the revenue originating from procurement. This figure has not changed significantly since 2014 and is not large enough to create opportunities for women and spur the growth of their businesses.

With mindsets among top companies bending towards diversity, equity, and inclusion, are women entrepreneurs ready to offer innovative solutions to procurement procedures? Corporate and public procurement strategies heavily influence both efficiency and innovation. The CEO of Best Buy said recently, "We better serve our customers, employees, and communities when there are more diverse voices at the table, and we listen to their stories and needs."

The absence of this outlook explains how companies and governments reinforce existing social patterns, ignoring the potential of female entrepreneurs, and magnifying the effect of shocking gender disparities.

• Only 2.2% of venture funding goes to startups founded by women. Procurement eligibility criteria for a women-owned business typically require at least 51% of the business to be owned by one or more women. Startup founders, unlike small business owners, are often diluted during funding and own less than 51% of a startup.
• Startup founders, unlike other women, do not get social services to support to offset caregiving responsibilities.
• Corporate and public procurement strategies do not focus on the capacity-building of women-led high-growth startups, especially science-focused startups.

"Women face extended pressures at home and the workplace - reluctant to return to high-pressure jobs, knowing they will lack the necessary support upon their return."

3. Including and empowering women through procurement

The following procurement actions would remove barriers to opportunity for women entrepreneurs and inspire venture capital firms to invest in their startups. Also, they would lead to a decrease in market risks through supply diversification.

• Corporations and public institutions should strive to allocate half of the procurement from startups to women-led startups.
• Develop a more collaborative strategy to fully embrace the early involvement of women-led startups by adopting a multi-stage approach in which procurement teams throughout the supply chain communicate about how to adjust value propositions to get contracted and give visibility to startups and their boards.
• Set cost targets, allocate time, budgets, and provide legal and expert support to commercially scale the products and services.
• Change the way questions are asked to eliminate gender bias during interviews with suppliers.
• Apply gender sensitivity scoring when announcing procurement requests to the market.
• Encourage and give importance to employees who adopt internal processes facilitating gender-balanced procurement outcomes.
• Establish guidelines with the support of risk management teams and reach an agreement on the level of tolerance and acceptance of failure. If a specific startup isn’t successful, the team gets hired by other startups or starts a new one, already knowing the pains and needs of the corporate partners.

4. Incentives are needed to bring women back to the workforce

Women face extended pressures at home and the workplace - reluctant to return to high-pressure jobs, knowing they will lack the necessary support upon their return. A new report from Deloitte found only one in five women believe their employers have helped them create clear boundaries between work time and personal time during the pandemic.

Now more than a third (37%) are working from home full time versus 1% before the pandemic.

Therefore governments, corporations, and private employers must better examine the conditions impacting women and create a more balanced work environment. Employers can attract talented women to return to the workforce by establishing better working conditions. Alternatively, women can pursue entrepreneurship, but this transition will require governments to create an enabling environment while corporations need to increase their procurement from women-led businesses.

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(Image Credit: Unsplash)