How big data can help ideas thrive, by Irene Arias Hofman, Interamerican Development Bank

Irene Arias Hofman leads the IDB Lab, the innovation laboratory of the Inter-American Development Bank Group. IDB's mission is to invest in emerging startups and promoting innovation in Latin America and the Caribbean (LAC), aiming to reduce the inequalities of the region- exacerbated today by the pandemic.

“We foster mostly tech based solutions aimed at changing the lives of millions of people in vulnerable situations, whether due to economic, social or environmental conditions. We do so by supporting and connectin entrepreneurs with investors, accelerators, universities, NGOs, corporations, as well as with other innovation ecosystems in the region and the world ”, explains Arias Hofman.

What do we understand by data governance?

Data governance are all those rules, policies and procedures that regulate the processing of data in an organization: how and from what sources it is obtained, how it is transformed and its quality preserved, its correct labeling and consistency, how it is guarded and stored and under what conditions it can be accessed for decision-making.

Throughout the process, compliance with regulations must be guaranteed – the latter are especially strict in some territories when it comes to the privacy and protection of individual data.

How can data governance help entrepreneurship?

The availability of data is certainly important for businesses, not only technology-based but of any kind, because they help make decisions more accurately.

E.g., if one wanted to set up a seemingly simple business, like a bakery, having the right data to backup the business plan could make the difference between a good or a bad decision. Data on mobility in the area, the population (age, gender, income) and their habits, and also data on the competition would help choose the most suitable location and adapt the type of bread to the demand in the area.

With technology based businesses the availability of data becomes even more important, especially those innitiaves reliant on artificial intelligence. It is exciting to imagine how crucial data can be for peole who want to develope their own ideas to thrive.

And for female entrepreneurship?

Open Data is becoming stronger at an international level and is radically inclusive, allowing access to anyone regardless of gender, social or economic status.

However, in the case of female entrepreneurship, particularly when it’s heavily technology reliant, there remains a gap in access to training, as it is the case with any type of STEM subjetct. The number and percentage of female data scientists needs to increase so that technology-based entrepreneurship is driven by diverse teams and mitigates algorithmic bias.

 

In developing countries, where women lack access to digital tools and knowledge, how can technology help them start new businesses??

In our region women are big entrepeneurs. But, unfortunatley, few of them can fully leverage their capacities due to the lack of opportunities: access to quality education, financing to start and scale companies, etc.

The good news is that technology has reached a point where it’s fostering solutions for entrepreneurship as well as democratizing access to knowledge and skills. Female entrepeneurs are already benefiting from this and together with their teams are much better equipped to build scalable companies.

In this regard, I would like to highlight that the technological talent of the region (programmers, data experts, AI / machine learning, blockchain, etc.), is becoming increasingly recognized not only regionally but internationally, and thus we consider it essential to test and support new ways to train tech talents with soft skills.

Can you give us a concrete example of innovative projects with large-scale impact on vulnerable populations?

There are many – e.g. in 2014 IDB Lab financed Guatemala based Kingo Solar, a company aiming to bring solar energy to very low-income families with no access to electricity. The solar kit they developed is a powerful tool to help disadvantaged children to study, disadvantaged families to keep food, have access to information (TV / radio) and communication (cell phones).

The kit not only improves their life standards, it also benefits individuals who become Kingo local technical assistants. The non-reimbursable financing from the BID Lab made it possible for the company to raise capital from the HREFF venture capital fund in 2017 in its Series B financing (US $ 3M) thus reaching 50,000 households in Latin America.

Is fintech one of the most important tools for female entrepreneurs in developing countries?

The region suffers from a remarkably low level of banking.

Fintech innovations are playing an unprecedented role in financial inclusion, speeding up the democratization of the access to financial products and services for individuals, small and medium-sized businesses. It remains unclear whether fintech tools are reaching the entrepreneurial sector in the region and the world.

An example of fintech tools for entrepreneurship would be participatory financing platforms. In this sense, alternative financing formulas for entrepreneurship still have a long way to go.

Thanks to this fintech revolution, female entrepreneurial talent in Latin America and the Caribbean has been on the rise: one in three fintech start-ups in our region has a woman in its founding team, according to the latest data published by the IDB. This is well above the global average, estimated at 7% according to the same report.

Also, 80% of Fintech has women onboard, which also signals a growing role for female technological talent in the sector.

How does the gender gap impact the start up sector?

The financing gap continues to be the main bottleneck faced by female entrepreneurs in the region. The data shows that less than 2% of venture capital in Latin America goes to companies led by women.

This ultimately ends up being a great lost opportunity at the investment and business level given that women control 64% of household spending decisions, that is, around $ 20 trillion in consumer spending globally.

According to a recent survey by the BID Lab, 46% of STEM female entrepreneurs have at least one dependent care person – work-life balance and the social role of women also become big challenges in order to go ahead with a projet.

Do you consider women to have specific characteristics as entrepreneurs?

Following a survey by the IDB Lab on STEM female entrepreneurship in Latin America and the Caribbean among 1.100 women, “a sense of purpose, personal passions and commitment to challenges and to solving problems in their communities or countries” are their main motivations for creating new companies. This matches the sectors with a bigger presence of startups co-founded by women in our region: fintech, edtech and healthtech / biotech, all of which have a great potential.

In addition to this, some studies show that female entrepreneurs tend to have a more nuanced view of risk and are generally more ambitious than men when it comes to becoming serial entrepreneurs. Also, companies with at least one female founder perform better than companies led exclusively by male founders: that is, higher sales and profits.