Many women dream about launching a company that grows quickly, resulting in a stunningly successful IPO that yields great financial benefits. But, first, they need investment capital to get their business off and running and through the early years, when they're building the business and money is spent faster than it comes in.
In 2020, only 2.3% of venture capital funding was received by women-owned companies despite the fact that they own 40% of businesses and perform better than companies whose management teams are predominately white and male, according to Gallup, with diverse companies reporting revenue 19 points higher than that of companies with poor diversity.
Investing in a women-led business is one of the best ways to directly support the fight for gender parity. And, for women with the financial ability to invest, there are more opportunities to do so, like the exchange-traded fund WOMN ETF). Designed to track the Morningstar Women's Empowerment Index, the fund provides exposure to companies worldwide with strong policies and practices in support of women's empowerment and gender equality.
If your desire is to use your hard-earned dollars to support the efforts of other working women, follow these steps to be sure that your money is benefitting companies you believe in:
1. Hire a female financial advisor
While financial advisors of either gender can help you invest in women-led companies, female advisors are often better at understanding the challenges female investors and entrepreneurs face because they deal with similar challenges in their own field. Investing is a primarily male-dominated industry and just over 32% of investors are women, according to 2019 data from the Bureau of Labor Statistics. Working with a female advisor can bring their first-hand experience to the table, plus you're directly supporting a woman in another male-dominated career.
2. Choose your mutual funds carefully
Many investors rely heavily on mutual funds, where your money is pooled together with other investors to buy a variety of stocks. This strategy can be an easy way to create a diversified portfolio; it also gives you a chance to choose a mutual fund whose principles you agree with.
Before investing, be sure to always vet your mutual funds carefully to ensure that the companies included in each truly benefit that cause you believe in. For example, while mutual funds have strict criteria to make sure they're investing in socially conscious companies, on closer look you'll find that each fund defines "social consciousness" differently. Look into the companies included in your mutual funds individually before committing to the fund as a whole. The diversity of a company's board, their equal employment opportunities, or their sexual harassment trainings are strong indicators the company is working toward parity and will likely be a good place to invest.
3. Look for companies that are recognized for their women-friendly policies
If you feel comfortable buying individual stocks, there are also resources to help you invest in a woman-led company whose mission and internal organization prioritizes workplace parity. Many major magazines and organizations release yearly lists of the top women-led businesses. For example, the Women Presidents' Organization publishes an annual list of fastest-growing women-owned companies, and Working Mother Media publishes a variety of round-ups, including best family-friendly companies and top companies for multicultural women.
4. Join a women's angel investment group
If you have a hankering to support women who are starting new ventures and don't mind risking all of your money, consider joining an angel investment group that focuses on women. Carolyn Leonard, the only woman trading at the Chicago Board Options Exchange in the 1970s, and who knows something about breaking new ground, recently launched DyMynd Angels, a fund that bridges the gap between women with wealth and financial institutions that — like those male traders in the 1970s — are missing million-dollar opportunities. Opportunities like this allow you to invest in women-led businesses, both local and global.
If you aren't in a place to invest, you can still use your money to support female entrepreneurs. Consider donating to organizations that grant business loans to women in marginalized communities, such as Elizabeth Street Capital and Accion.