Unlocking Gender Equity Through Alternative Fund Structures: An Interview with Aunnie Patton Power

Aunnie Patton Power is the founder of Intelligent Impact, an innovative finance advisory firm and a university lecturer on Innovative Finance, Impact Investing and Technology for Impact. She is also the author of Adventure Finance: How to Create a Funding Journey that Blends Profit and Purpose, and is starting a new book about alternative funding structures. We spoke to her about the most impactful lever and strategies for getting more capital flowing to women (and especially women of colour) - and how traditional structures can fall short.

When it comes to deploying or influencing gender lens capital, what are the biggest challenges you've noticed in the last couple of years?     

Looking for institutional capital, because it is the first time raising funds for many female fund managers. For independently raised gender lens funds, the hardest thing has been that the pool of available capital allocators is artificially small, although I have seen a shift in the last 18 months. Prior to this, and even still, [I don’t see many] organisations that are willing to invest in first time female fund managers. So a lot of these female fund managers are going to the same people. They just struggle to get the level of capital, especially that first cheque, needed to crowd in the rest of the money.

Is your primary definition of gender lens capital first time female fund managers? 

It's what I've seen to date, although I know we are seeing more of a gender lens focus within larger institutional funds. I think two years ago it would have been very difficult to talk about larger institutional funds, with more of a gender mandate, just because I didn't see it very often, particularly in Africa, where a lot of my work is. So it was primarily those first time female fund managers. I definitely have seen more capital being talked about but I can't confidently say that it's flowing. I cannot say for certain that they are allocating meaningful amounts of money, to either female fund managers or to direct deals with a gender focus.

In terms of broader trends, how have you noticed gender finance evolving?

Everyone has their own viewpoint, we all sit at our own part of the table; I focus on alternative capital structures. Because that's my work, I am seeing more non-traditional venture capital (VC) funds. I'm having more conversations with women, and with other kinds of gender lens investors, that are looking beyond the traditional VC model.

How are entrepreneur or fund manager needs not being met by more traditional structures, and what’s working better?

There is an exclusionary nature to traditional VC, in that investment requires exponential growth, exits and the hyperbolic nature of a founder that says: “This organisation can be the next Airbnb, Uber, etc.”. We know from research, particularly pertaining to the last requirement, that women are less likely to make those types of claims, and from my own research, I’ve seen that female fund managers and entrepreneurs are more sceptical of the traditional VC model. I think that historically the under-representation of women in VC is partially because of the number of women that are making the decisions, but I also think it fundamentally has to do with the investment structure. 

“I think that the funders, particularly when women are making decisions, have an ability to try and tailor funding for organisations—not just exponential growth organisations.”

It must be said that there are alternatives like venture debt, revenue-based financing, supply chain financing and other types of early-stage risk capital. I think that the funders, particularly when women are making decisions, have an ability to try and tailor funding for organisations—not just exponential growth organisations. The ability to see opportunities beyond the traditional VC model, the re-examination of traditional VC and private equity is so important. It is not just about the traditional playbook. 

It is about really looking at what the needs of the entrepreneur are, as well as looking at how we do new fund structures. So looking at things like micro funds and rolling funds, how do we use the crowd? How do you figure out deal-by-deal warehousing? What would female search funds look like? For my particular work, it’s about looking at how the investment structure affects gender and racial equity in investment. 

How do you communicate the value of these alternative structures?

I rely on the business case, more than I rely on any kind of necessity to create impact, even though I don't separate them. When it comes to racial equity, and gender equity, there is an incredible amount of value that is being lost in the market right now. There's asymmetry around capital allocation that is not necessarily recognising talent, but is reinforcing racial and gender norms. There's no possible way 95% of the talent in the world exists in white male entrepreneurs. Beyond a kind of deal-by-deal basis, I think there is a whole set of entrepreneurs, and fund managers, that are under-invested.

Where do you want the people you're advising and working with to be in 12 months? Where would you like to be?

I want to see us potentially helping more entrepreneurs keep more ownership in the company down the line. I am working on a project across countries that is essentially trying to create a SAFE-like document around redeemable equity, which is a type of investment where founders can repurchase their equity. So essentially, you buy shares in a company as an investor and then there's a capped amount that they could be repurchased for by the company. This option, for funders and for founders, could have a huge impact. I think this is more in line with a lot of what entrepreneurs actually are looking for. I'm hoping to have those signed off by multiple tax authorities, to be able to help funders think about using them in a way that's not as scary. 

“performative small funds, that sit alongside big funds, for females and people of colour are just insulting most of the time”

I would love to see more institutional funds evaluating female fund managers and female-run companies, on a line-by-line basis. I think that performative small funds, that sit alongside big funds, for females and people of colour are just insulting most of the time. I don't think [gender lens] should be a small separate pot of funding. I would like to see more of that capital actually flowing to women, particularly to women of colour.