Enhancing the post-pandemic recovery through supporting women and small businesses


Enhancing the post-pandemic recovery through supporting women and small businesses

No aspect of civilization has been spared by the COVID-19 epidemic, which has had a devastating impact on global populations, healthcare institutions, and the labour and financial markets. From a business perspective, it has disproportionately affected female and ethnically diverse business owners and entrepreneurs. According to a recent survey by Global Entrepreneurship Monitor, for instance, nearly half of all female business owners in high-income nations reported business closures, and women were 20% more likely than males to report closures.

Non-white business owners had a number of extra difficulties, such as a concentration in sectors that were vulnerable to change, such as retail, lodging and food services, personal care, and laundry services, among others. The disruption served to compound unfavourable outcomes and closures because these diverse entrepreneurs' financial standing already lagged below that of their white peers prior to the epidemic.

Access to funding for diverse businesses, including women

A 2019 study indicated that 61% of female founders choose to self-fund their businesses. The idea of restricted access to funding is supported by a thorough examination of women entrepreneurs in the IT sector. According to a recent TechCrunch assessment of all venture investments, only 10% of all funds went to initiatives with female backing, with the other 90% going to ventures with male backing.

Black business owners' limited access to financing is made worse by a systemic exclusion from venture capital and traditional banking. They are more likely to have their bank loan applications denied and, if approved, to have more stringent limitations placed on them. Black and women business owners are unable to operationalize and scale their enterprises because of the unequal participation in financial institutions.

A range of new abilities and tasks must be developed in order to launch a new firm. In addition to assisting early-stage businesses with accessing new markets, navigating available finance, implementing cutting-edge technology, and learning managerial skills, mentoring may also provide the ecosystem and essential support systems for starting a business.

Despite the necessity for mentorship in the entrepreneurial world, a recent study found that access to mentorship networks was much less common for women and diverse entrepreneurs.

implicit bias in consumer behaviour

According to a US study, diverse entrepreneurs' businesses, particularly those owned by people who identify as Black or African Americans, are sadly underutilised. Despite making up 2.2 per cent of employee-run enterprises in the US, Black-owned companies only bring in 0.33 per cent of the country's overall income.

The limited use of Black- and women-owned firms may be caused by a number of causes, including a lack of resources to sell products and services to important target populations. However, evidence points to a more sinister factor at work: unfavourable biases related to diverse business ownership and their subsequent impact on consumer purchase decisions.

Female and ethnic business owners need an egalitarian starting point rather than favouritism. We conducted interviews with more than 20 diverse founders and investors to better understand why supporting diverse entrepreneurs is essential in the post-pandemic era. These discussions highlighted advantages that go beyond monetary gains.

Despite having limited funding, capital generation efficiency

According to our research, because they have less access to finance, women and diverse entrepreneurs tend to gravitate toward non-traditional funding sources. The first French-Caribbean natural cosmetic company, Kadalys, which uses antioxidants from banana trees, was founded by Shirley Billot. She brought attention to the funding difficulty faced by Caribbean companies. Investors frequently see this area as a tourism destination rather than an entrepreneurial hotspot. She recruited nearby banana farmers to become company shareholders in order to raise money while also giving back in order to close this cash gap. Access to financing is also increased by other sources like the Black Opportunity Fund and the Women's Funding Network.

The panellists on the LEAP by McKinsey podcast cite a significant indicator as the dedication to building enterprises that have a positive influence on society and the economy. Carla Robinson founded Canary Tech in the healthcare industry to increase marginalised communities' access to care through remote medical assistance. Her desire to assist elderly Black people who require ongoing assistance managing chronic diseases like diabetes sparked this enthusiasm. By addressing the gaps within these groups, solutions can be developed that go beyond the primary targets.

Regardless of portfolio performance, familiarity or comparable ethnic and gender demographics seem to influence who receives financing from private sources, businesses, or venture capital. Due of the underrepresentation of women and minority entrepreneurs in the VC industry, these business owners have recently decided to start their own funds. According to a Deutsche VC survey, 140 new funds were founded by women between 2017 and 2020, an increase of 104% from 2010 to 2016. 16 new Black and Latino-led funds were introduced during that time, a 41 per cent increase.

Supporting women and other types of entrepreneurs

While giving women and varied entrepreneurs crucial networking opportunities as they navigate the early stages of new business operations, the increased presence of women and diverse fund founders should attenuate some of the demographic and cultural biases in the allocation of financing.

Women and other entrepreneurs of colour also provide a special viewpoint on underserved market niches. Recent studies suggest that if companies concentrated more on producing goods and services that were specifically tailored to their needs and made a concerted effort to serve communities that have historically been excluded from mainstream outlets, these demographics might be willing to change their brand loyalty.

In order to take corrective action to lessen the effects suffered by marginalised populations and to aid in their recovery in a post-pandemic environment, investing in women and members of varied ethnic minorities is essential. Investors need to pay attention.

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