The number of women entrepreneurs in the traditionally male-dominated fields of science, technology, engineering and mathematics is on the rise throughout Latin America and the Caribbean, according to the Inter-American Development Bank (IDB).
A recent study from the IDB Lab and Santander X shows that these so-called STEMpreneurs are successfully raising capital, building start-ups and looking to scale up their businesses within the next five years – showing that this is a niche poised to contribute to more innovation, employment and economic growth in the region.
Studying success
The IDB surveyed 1,148 women entrepreneurs (founders or partners in start-ups) in LAC, out of which 400 were in the STEM fields. The top sectors were those that incorporated technology into mainstream services: FinTech, BioTech, EdTech and HealthTech. From this sampling, the IDB was able to draw some conclusions about the characteristics of successful female STEMpreneurs. Most are under 40 years old, just over half are single, the majority are highly educated, having a bachelor’s degree or higher, and over half have some form of international experience either by studying or working abroad.
Ambitious and driven, most respondents said their innate passion fuelled their business along with the desire to push themselves personally and grow their companies outside their home countries into the regional market. Those involved in HealthTech and EdTech also expressed a willingness to address societal concerns, with many motivated to start their business having identified a need in their own communities.
The most successful companies are rarely the work of one or two people. The IDB research highlights the importance of a support infrastructure and found that while family, friends and partners provide the most support on a personal level, funding appears to be split fairly evenly with 44 per cent saying they received financial support from their inner circle and 43 per cent from more formal sources such as venture capitalists, incubators, business accelerators and angel investors.
The majority of female entrepreneurs surveyed by the IDB cited several key factors in explaining their success: personal ambition, motivation and mentoring. Two out of three had the benefit of a mentor to guide them which opened doors to more avenues of funding, as well as providing trusted advice and support.
A challenging environment
Unsurprisingly, LAC’s female STEMpreneurs face many of the same hurdles as their male counterparts. These include operating within a stagnant economic environment, insufficient human capital with the requisite training and education, and inadequate networking to build the necessary business connections.
The top three challenges noted by survey respondents were lack of financial support, lack of managerial and technical know-how and struggling to find a work-life balance. Financial resources is the main stumbling block and STEMpreneurs cast a wide net when trying to get their business off the ground. Less than half are self-financed with 54 per cent raising capital and, of that number, 73 per cent turned to a number of sources, favouring a combination of seed and venture capital funds. The majority of those ventures that raised over US$ 1mn in funding did so courtesy of these institutional investors.
Within the capital raising cycle, various hurdles were identified. At the outset, when searching for seed money, 51 per cent of STEMpreneurs lacked the appropriate network to access the right investors. Once initial funding was sourced, 27 per cent noted difficulty in getting information about investment instruments and a general lack of financial knowledge about how to proceed. Heading into the third stage, many felt that negotiating terms highlighted a mismatch in expectations when it came to valuing the business and others experienced unfavourable terms in their final agreements.
Aside from financial obstacles, research also showed that women in this niche believe gender perceptions and social constraints are holding them back. Respondents noted that a lack of confidence, the domestic sacrifices required and a lack of strong personal and professional networks hampered opportunities for women-led start-ups.
Untapped potential
The business landscape is changing. Within the last five years there has been a sharp uptick in the number of women moving into the entrepreneurial space and, according to the IDB, this trend is set to continue. With 80 per cent of female STEMpreneurs aiming to take their business international within the next five years, there is untapped potential for this niche to make a positive impact on Caribbean growth and development.
“Women founders are just as ambitious as men in their business growth,” says Susana Garcia-Robles, Chief of Investment Unit and Gender Initiatives Coordinator at IDB Lab. “Women are responsible for 64 per cent of all global purchasing decisions on products and services so having women in C-level positions in a company increases the chance that a start-up reaches a massive market.”
To fully develop this niche, the IDB recommends a new approach from both investors and governments. More women involved in accelerators and incubators (for example, on investment committees or in competition judging panels), investing in companies with a positive work-life balance and recognising and celebrating female mentors in the entrepreneurial space would encourage more movement in the private sector, according to the report. In terms of what governments can do, the IDB advises enhancing funding into the STEM sectors, creating national science and innovation centres with specific initiatives for women and strengthening education, scholarships and training programmes.
