Focus on tech funding holding female entrepreneurs back: Study

Governments and lending agencies must broaden perceptions of innovation to give more women-owned businesses access to capital, new report from Ottawa researchers says
Regine Paquette
Regine Paquette is co-owner of Ottawa-based Victoire boutique. (Photo by Mark Holleron)

Owners of a pair of buzzworthy fashion boutiques, Katie Frappier and Regine Paquette epitomize the growing role of women in the Canadian economy.

Victoire boutique, the retail company the longtime friends launched 12 years ago, now does more than a million dollars in annual sales and employs eight people at its locations in Westboro and downtown Toronto. Yet despite all their success, the owners say they’ve run up against nothing but brick walls when it comes to scoring capital.

“We’ve kind of totally given up on traditional financing,” says Paquette, a commerce graduate of the University of Ottawa. “I think we’re a successful business, but we really just don’t fit into what the banks are looking for.”

According to a new study from two prominent Ottawa researchers, Frappier and Paquette are hardly alone among Canadian women entrepreneurs. 

The report, sponsored by the federal government and Bank of Montreal and released in mid-February, says women own half of all new businesses and lead nearly 50 per cent of all small and medium-sized businesses in the country. It also notes their businesses tend to have higher survival rates than those owned by men.

Yet for all that, the study says, female entrepreneurs still have trouble accessing the financing they need to grow their enterprises. Nine out of 10 women-owned companies are in the service industry, and Canada’s focus on funding companies in the male-dominated tech sector is working against many female business owners, the report’s authors say.

“To be clear, tech is wonderful and we want to see more women in tech,” says co-author Janice McDonald, owner of consulting firm The Beacon Agency. “But because 90 per cent of women’s businesses are in service industries and this whole kind of thinking that tech equals innovation, there is this sense that they’re excluding all the other kinds of exciting innovations that are happening in women’s businesses right across the country.”

McDonald and her research partner, Clare Beckton of Carleton University, conducted interviews with 146 female entrepreneurs across Canada. Their report, titled Everywhere, Every Day Innovating, makes 40 recommendations aimed at governments, financial institutions and female entrepreneurs themselves.

The study calls on governments to include more women in the development of policies, programs and grants for entrepreneurs, while urging innovation hubs, incubators and accelerators to open their doors more widely to women business owners. 

Meanwhile, it’s asking banks and other lending institutions to reassess their strategies for lending money to female-owned businesses and calling on women entrepreneurs themselves to seek stronger relationships with banks, grow their business networks and think globally when looking to expand their operations.

“This study shows us what women already know to be true: that there is much more that we all can do to support women entrepreneurs and business owners,” Federal Small Business Minister Bardish Chagger, who attended the news conference when the report was released, said.

“As innovation changes our economy, women entrepreneurs will be key to our future success. We need more women in business – for our economy, and more importantly, for our society.”

The study’s authors also argue funding agencies need to do a better job of gathering data to determine exactly what share of grants and investment capital is being doled out to female-owned companies. 

“We need to assess and track who actually is getting the grants and the loans because we want to make sure that women are benefiting equitably,” McDonald says. “If we’re not measuring who’s getting them, we don’t even have that ability to start with a baseline and say, ‘We’re improving or things are getting worse.’”

The report argues that women entrepreneurs across Canada are innovating every day in a myriad of ways that go beyond breakthrough technologies from software firms and the like, but the focus on tech has obscured this reality.

“In sum, it seems like the very definition of innovation – as understood by policy and decision-makers in Canada – prevents women from accessing recognition and funding for their innovations,” the report says.

Paquette, who was one of the business owners McDonald and Beckton interviewed, agrees. She and Frappier have introduced a number of creative policies to encourage employees to stick around in an industry notorious for its high turnover rate, she says, including coaching them on everything from devising social media campaigns to creating window displays.

‘Dynamic environment’

“We offer a really dynamic, creative environment that’s kind of tailored to their skill sets and where they want to grow personally,” she says.

But Paquette, who helped launch a women’s networking group called the Guild, also says it’s incumbent on female entrepreneurs to work together and use their connections to help navigate their way through such challenges.

Shelley True, owner of Ottawa’s TRUEdotDesign and another woman interviewed for the study, agrees entrepreneurs need to help each other push past barriers to securing capital.

“I’m a big advocate of networking and leveraging my connections and talking to other leaders … and asking, ‘Have you ever used other funding and how do you get access to that?’” she says. “This is what we need to be talking about. It’s there – I know it’s there – we just need to know which opportunities will fit with our businesses and growth and how to access that.”

Terri Storey, founder and CEO of SnapClarity, says her Invest Ottawa-based tech startup has landed more than $1.5 million in angel funding and recently received a $500,000 grant from the federal government’s Build in Canada Innovation Program.

“Honestly, I didn’t have a lot of barriers to financing,” says Storey, whose firm has created a mobile app designed to make it easier for users to access mental health services. “The funding programs and the network around me were incredible.”

Storey, who was not interviewed for the study, says it’s vital for entrepreneurs to do their homework before seeking funding, no matter what industry they’re in.

“I went out to who I thought was aligned with our mission. It’s really about you need to know the landscape, and I would say good products get funded.”

The report’s authors say they’re hopeful that governments, financial institutions and the business establishment are taking the issues highlighted in the report seriously. 

“If we look at the value and importance of a study like this, it really does attract the attention of policy-makers,” McDonald says. “They see there are ways to make this right.”

Key recommendations

For governments:

  • Include women entrepreneurs in the design, development, implementation and management of all programs, policies and grant development
  • Ensure superclusters and innovation hubs are inclusive and welcome women entrepreneurs from all sectors

For financial institutions:

  • Offer additional knowledge and resources to increase women’s confidence and likelihood of loan acceptance
  • Track and monitor women entrepreneurs’ loan rates and payback rates and share this information

For entrepreneurs:

  • Establish a relationship with financial institutions well before loans are needed
  • Take steps to increase knowledge in investment opportunities, exits and the range of financial instruments available for funding
  • Join networks that provide access to information about financing, investment and grants