International: General

Hal Austin 

FT FinancialAdviser 

Published Thursday , March 04, 2010

The spectacular changes brought about by the banking crisis and the following recession has given us an opportunity to take a long, hard look at the way we do business.

Until now, business, and in particular financial services, has been seen as a testosterone-fuelled activity from which women have been excluded.

But, the challenges from the more dynamic of the emerging markets and narrow-focusing on lifestyles business models are now changing to reflect the new reality.

And there is a very strong case. In April 2006, The Economist made a claim for women as the "most powerful engine of economic growth", backed by a growing body of evidence.

Between 2001 and 2006, women-focused businesses accounted for 132 per cent growth, more than any other marketing segment in the US and their purchasing power was estimated at US$3.3 trillion.

An article in the influential Harvard Business Review in September last year, said that as a market, women represented a bigger business opportunity than China and India combined – twice as big, it claimed.

The article claimed that globally, women controlled US$20 trillion in annual consumer spending, a figure that looked set to rise to $28trn within five years.

"Their $13 trillion in total yearly earnings could reach $18 trillion in the same period … given those numbers, it would be foolish to ignore or underestimate the female consumer."

There are also a number of other important demographic changes taking place in almost all developed societies, such as the higher percentage of female graduates, the increasing number of women entering the traditional professions and, even at school level, the better performance of girls in all subjects.

The HBR article continued: "Despite the remarkable strides in market power and social position that they (women) have made in the past century, they still appear to be undervalued in the marketplace and underestimated in the workplace.

"They have too many demands on their time and constantly juggle conflicting priorities - work, home, and family.

"Few companies have responded to their need for time-saving solutions or for products and services designed specifically for them."

There is also a growing body of evidence which shows that companies with women on the executive management teams outperform other firms.

However, when it comes to women-led firms seeking finance to fund start-ups or grow existing enterprises, they come up against a brick wall.

One company out to change that is Stargate Capital Investment Group, an Enterprise Investment Scheme incubator, which aims to radically overhaul the business landscape.

Using its two regulated vehicles, Stargate Capital Management Limited and Stargate Corporate Finance Limited, the company has formed the Trapezia as the vehicles for building a portfolio of women-focused businesses.

So far, they have struck it lucky with three firms: Femeda, a biotech firm, which has devised a product for dealing with incontinence; Cupcake Mum, a South London-based private wellness clinic for expectant women and new mothers; and Diet Freedom, manufacturers of a sweetener to replace sugar and aimed at the health conscious and diabetic markets.

The driving force behind the fund is Gita Patel, a graduate of the London School of Economics who went on to train with Arthur Andersen as an accountant.

She worked for 15 years with NatWest Group, before setting up the Trapezia EIS fund, which raised £4.5m when it was closed in November 2006.

A dynamic and forceful woman, Ms Patel is also a university governor, and serves on various high-powered business committees for such influential organisation as the London Chamber of Commerce and the Institute of Chartered Accountants.

She is also a non-executive director of a number of private companies and a mentor to a number of young businesswomen.

The company has now launched a second fund, Trapezia EIS 11 and is looking for high net-worth individuals and other investors to become strategic partners who are keen to invest in the growing sector.

"We are looking for investors with a minimum of £25,000 to invest in these companies," she said. "This is a serious market opportunity."

Warming to the theme, she added: "We are not in the businesses of gender equality, there must be a business case for supporting any of the enterprises.

"The question we ask is: is there pain in the market and does this product provide the medicine."

It is, she said, targeting the mainstream of the business sector and is not about housewives looking for pin-money from hobbies or hairdressing.

"We are about meeting the business needs, wants and aspirations of women who have made money from the business skills and not just from a divorce."

An EIS offers a number of tax advantages to high net-worth investors which an ordinary investor would not access, such as income tax relief at 20 per cent, capital gains tax deferral relief of up to 40 per cent for the lifetime of the investment, inheritance tax exemption and loss relief of up to 50 per cent.

In its literature, Stargate claims: "The Trapezia investment strategy emphasises the relative advantages of gender diversity and how these advantages can be deployed in the entrepreneurial context.

"There is compelling scientific evidence that women, in general, take a broad perspective, think contextually and holistically, adopt an intuitive and imaginative approach and have a greater tendency to plan long-term - all potentially valuable traits for entrepreneurs."

By ignoring the potential tied up in the female market the UK might be missing a trick that the US has already spotted.

Although female entrepreneurs are growing in the UK, we are still a long way behind the US, said Ms Patel.

She continued: "One question we need to ask ourselves is why is the failure rate for small businesses so high in this country?"

Source: Financial Times Advisor. View original here.