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The IUP Journal of Case Folio

SheEO's Community-Based Funding Model: An Alternative Solution to Foster Women Entrepreneurship?

Article Details

Pub. Date	: March 2022
Product Name	: The IUP Journal of Case Folio
Product Type	: Article
Product Code	: IJCF020322
Author Name	: Jitesh Nair
Availability	: YES
Subject/Domain	: Management
Download Format	: PDF Format
No. of Pages	: 21

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Abstract

The case describes the alternative financing model to women entrepreneurs that Vicki Saunders (Saunders) sought to promote through SheEO, a Canadian venture she founded in 2015. SheEO was based on a 'holistic feminist model' that gave women-led ventures the flexibility to grow at their own pace and on their own terms. It touches upon the need for this alternative investment model that would enable women leaders to come up with solutions to encourage investments in women-led startups, given that all-women teams had never received more than 3% of the total capital raised by various ventures since 2010. Also, the investments made in women-led startups were skewed across sectors since most venture capitalists preferred technology startups, while most of the women-led businesses were in service industries. It describes in detail the key components of the SheEO business funding model that was aligned to the mindset of women entrepreneurs to leverage their talents, strengths, and passion to create sustainable businesses. The SheEO model was built around the principle of 'radical generosity' where the investors (activators) were like-minded women who offered funding with no expectation of any direct financial return. This approach helped create a perpetual funding model which combined the meaning of philanthropy with the impact of investment. It also delves into the inclusive approach to venture selection where preference was given for businesses run by racial minorities, indigenous women, LGBTQ women, or women of color. The model encouraged women entrepreneurs in sectors like education, food sustainability, waste reduction, energy efficiency, inclusion, and biotech innovation where the business fulfilled at least one or more of the UN Sustainable Development Goals. Next, it touches upon the personalized localized support system offered to women founders in the form of venture retreats and incubation programs put in place across each region and how selected ventures decided as a group to distribute the available capital rather than adopt the winner-takes-all approach of conventional venture competitions. Though the model carries the potential to help women entrepreneurs the world over to build their business while staying true to their values, the SheEO model has not yet been able to scale up to the levels needed to fulfill its lofty objectives.

Our current economic system isn't working; it's built on inequality and it's unsustainable. We've lost our sense of community, and we don't know how to say, 'maybe we have enough. That's why SheEO is redefining how things are d on e. 1

- Vicki Saunders, Founder, SheEO, in 2021.

Ensuring access to finance for women-led enterprises ultimately creates jobs and contributes to our shared prosperity. Not only does empowering women make ethical and social sense, but it also happens to be good for business." 2
- Lilyana Pavlova, Vice President, European Investment Bank, in 2020.
The biggest problem with the status quo investment models is that they tend to penalize certain qualities common in women. Most people look at the way women run businesses as problematic. They get to profitability quickly; that's considered a bad thing. They are capital efficient; that's considered a bad thing." 3
- Vicki Saunders, Founder SheEO, in 2016

Introduction

According to a report "A Decade in Review: Funding to the Female Founders" by Crunch base4 , the average share of all-female founders of VC funding over the last decade(2010-2020)was less than three percent in the US. In 2017 and 2018, all-women teams received just 2.2% of the $85 billion total invested by venture capitalists.5 In 2019, funding for women-led startups was an all-time high of 2.8%. In 2020, that fell to 2.3%. In Europe, though women represented roughly 52% of its overall population, they constituted only 34% of the European Union's self-employed workers, and 30% of its startup entrepreneurs.6

Only about 12% of decision makers at VC firms were women, and most firms still did not have a single female partner, even as of 20217 (Exhibit I gives further details of this discrepancy).

Another challenge was that venture capitalists preferred to invest in technology startups, while 90% of the women-led businesses were in service industries. The International Finance Corporation (IFC) estimated a $320 billion financing gap for female entrepreneurs in small and medium enterprises in developing countries alone.8 This necessitated alternative models of investment and growth for women entrepreneurs that focused on sustainability.

Vicki Saunders (Saunders) founded SheEO in Canada in 2015 to offer an alternative financing model to women entrepreneurs. This was a 'holistic feminist model' that gave women-led ventures the flexibility to grow at their own pace and on their own terms. According to Saunders, "The end goal, however, is to change the culture around how investors support businesses. It is not just our capital that needs to be activated;

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