Why Chile’s government accelerator is investing in women-led startups

Globally, less than one in five startups have a female founder. And progress is slow: the percentage of women-founded venture-backed companies has stood still at around 17% since 2012.

Some of the problems stem from the gender issues that hold women back in every sector, from challenges of work-family balance, to unequal access to information, training, and business networks. Women earn less – globally an average of $12,000 a year, compared to $21,000 for men – which means they have fewer assets to invest, and less to fall back on if a risk doesn’t work out.

“Women don’t necessarily have time – they are constantly juggling, that’s a fact of life. And we still earn 30% less than men, so women don’t have a safety net,” said Ayelet Nahmias-Verbin, an Israeli politician who runs a large conference in parliament for women in high-tech.

However, the number one barrier women entrepreneurs still face is access to capital. In 2016, across all US funding stages, $94 billion was invested in male-only founder teams, but only $10 billion went to companies with one or more female founder.

Part of the problem is that most investors are themselves men. Canada’s top four venture capital firms – with nearly $1.5-billion of investment funds – count a total of just one woman investing partner in their ranks.

“Women don’t necessarily have time – they are constantly juggling, that’s a fact of life”

Nahmias-Verbin believes gender also plays a role in attitudes towards asking for money. “The M-word is like the F-word for women – as a politician I hate asking for donations for my campaigns. Men have no inkling, no embarrassment: they raise money and they lose, but eventually they win – that’s the way we should go about it, but we don’t have that confidence,” she said.

“In competition for public tenders, we’ve made it so that companies get credit for having a woman controlling shareholder. We need to do that for startups – our government needs to create funds that give preference to companies owned by women.”

In Chile, the government has now done just that.

Start-Up Chile (SUP) is the Chilean government’s world-famous startup accelerator for high-potential entrepreneurs. It brings some 100 businesses to the country every year, and has created more than 5,000 jobs across the world. It is entirely publicly funded, and it is estimated that the startups it has backed have a value of $1.35bn.

“The M-word [money] is like the F-word for women”

However, in 2015, 85% percent of startups in the accelerator program were founded by men. “Women were not being represented in the programs that we had. So, we thought, what could we do with our core program, Seed, to increase diversity,” said Patricia Hansen, former Acceleration Director of SUP and now Chile’s Investment Commissioner for North America.

“This is, of course, so that women with their projects benefit, but it’s also for the sake of technology – we believe we need more diversity in teams building technology for the future,” said Hansen. Recent research suggests that startups with female founders actually grow faster.

Their answer was S Factory, a four-month-long pre-accelerator for startups that are less than six months old and have at least one female founder. It aims to help first-time female entrepreneurs at the earliest stage: participants turn an idea into a minimum viable product that will be competitive in applications for the core program or for other accelerators around the world.

“Instead of a quota, it prepares women at an earlier stage, lowering the entry barriers, and that way women will be fully ready to compete at whatever level you put them at,” said Hansen.

The intense course load involves pitch training, an investor preparation lab, and mentoring with continual progress reports. Critically, the female-led startups are also given $15,000 of equity free funding (SUP takes no cut of the company) to help get off the ground, alongside a one year visa to work in Chile.

“Technology and scalability come in a bundle”

Throughout the training and in the rigorous selection process, the focus is on scalability, on finding an idea – or a person – that could change the world. “We look for startups that can reach more than one market in the first years and that could replicate their business model easily in those difference markets. Technology allows you do to that, so technology and scalability come in a bundle,” said Hansen.

“On the other hand, the program is to empower the founder, so even if the idea is not the best one, we take a deep look into the team behind it,” she added. “We need people that could be coachable, so that if this idea doesn’t work out they have the skills to try another one.”

The program has only been running since 2015, but its impact is already starting to show. In just two years, the proportion of women-led startups in SUP’s core program has increased from 15% to 25%. Startups that gain a place on that core program immediately receive a further $30,000 of equity free funding. Some graduates have also been accepted into other accelerators, including Y-Combinator.

There are two rounds a year with 20-30 companies in each batch; today more than 100 female-led projects have been funded.

“I would like to see women venture into building companies the way men do”

However, as the program develops, one risk is sharpening the divide between men and women. Some critics have argued that women-targeted initiatives in the sector further ghettoize women.

“My idea of this was to have teams that are more diverse. But sometimes when you have projects or programs that are targeted at a certain group of people, they tend to close themselves into that specific group,” said Hansen.

“What I don’t like is that sometimes we have teams compiled only by women – we’d like to have mixed teams – and if there is a mixed composition, it’s almost always from a trusted, near circle. So, let’s say, a father, a cousin, a brother, a friend from high school, a friend from college – I’d say 80% of the time.”

“For example, we see a lot of husbands and wives trying to do startups together, but I would like to see women venture into building companies the way men build companies, looking for the right fit for the company, not the right fit personally.”

(Picture credit: Flickr/wocintech)

Odette Chalaby
odette.chalaby@apolitical.co