At Fundamental we’re deeply committed to create solutions with our ventures that solve Latin America’s biggest challenges: inequality, unemployment, food security and effects of climate change. What exactly does that entail? In honor of International Women’s Day, in this article we’ll focus on Gender Inequality and how it affects women’s economic opportunities in the region.

Since 1977, the 8th of March has been recognized as “International Women’s Day” by the United Nations. However, in many Latin American countries this day is not for celebrating but for protesting the everyday inequality and (deadly) violence that women face.

Women in Latin America struggle to participate and thrive in the economic system.

It’s important to remember that gender inequality impacts all aspects of the female experience but has great implications for women’s ability to work and make a livelihood. LATAM’s gender gap in labor participation is one of the largest in the world! Although women’s share of the workforce has grown over the last 50 years and 58% attained labor participation, it is still far below male participation, which is around 82% (IDB, 2019). What are the contributing factors and consequences?

• Unpaid labor is work that does not render financial compensation within a household (childcare, cleaning, cooking, etc). There is still a cultural expectation of women being the main caregiver resulting in them taking on twice as much unpaid labor hours than men and even more in the years they have children (IDB, 2019). Hence, unpaid labor can signify a pitfall for women as it compromises their ability to take on paid work, as well as explore academic or entrepreneurial opportunities.
• Many women find themselves trapped in low paying jobs. Despite growing participation: Once women enter the workforce, they tend to be employed in lower-paying jobs compared to men due to occupational segregation, meaning they usually study for and work in female-dominated sectors like care or education that are poorly rewarded. A study conducted by BID shows that despite a comparatively high female labor participation in Peru (80%) the quality of employment tends to be worse as many rural women lack access to education and find themselves in states of self-employment, unpaid, informal, or part-time jobs.
• Increased education doesn’t translate into gender pay parity. Although more women (60%) than men (less than 50%) are graduating from college in Latin America, the pay off and representation of women in the workplace trails behind. In the countries where Fundamental currently has ventures, the following hourly wage gaps persist: 20% in Mexico, 6% in Colombia, 30% in Peru and 5% in favor of women in Guatemala (largely due to the “maid effect”) (BID study).
• Sexual Harassment in the workplace is pervasive. A recent survey in Mexico showed that 20.8% of the women respondents said that they had suffered gender-based violence in the workplace in the past year. Additionally, traveling to and from work often imposes risk for women as public transportation is often filled with forms of abuse. Mexico City is currently the most dangerous transport system for women out of five of the world’s biggest commuter cities.

The data suggests that the lack of economic opportunities puts women in Latin America at risk of economic vulnerability and dependency, which goes far beyond mere income disparities and affects their overall security, freedom of choice and psychological well-being.

Is entrepreneurship an opportunity for women to increase income?

According to the Global Entrepreneurship Monitor, women in Latin America exhibit some of the highest levels of entreprenuership. It can allow women to overcome the barriers above, as running your own business allows for greater autonomy and flexibility. However, women entrepreneurs face their own set of challenges:

• Women-led businesses are typically small and informal and less digitized: Almost all (99.5%) of women-owned businesses qualify as “micro” meaning that they employ less than 10 people and 78% of women owned businesses are informal. They also use less digital tools to facilitate their business compared to men.
• Women founders are not receiving sufficient investments. Only 2% of capital goes towards women led businesses.
• Women often depend on personal savings to start their business. 73% of women cannot access financial capital for their business due to the limited financial education and tools tailored to their needs, as many low and middle income women lack a credit history or other requirements imposed by banking institutions.
• Not enough women mentors and communities of support, means that women often face the hardships of entrepreneurship alone. 48% of female founders have reported a lack of mentors and female support, according to Inc.

How does this all translate for Fundamental and our venture building ?

Although entrepreneurship provides opportunities for women, it is not free of gender-specific barriers. It is the aspiration of Fundamental to overcome these by building ventures providing women-owned microbusinesses with transformative solutions. How does this look like in real life? The best example from our portfolio is Voalá!:

Voalá! is a startup in Guatemala, focusing on beauty professionals. Only 37% of women in Guatemala participate in the formal labor market (compared to 87% men), giving it the lowest rank in LATAM. However, the beauty industry represents an exception and therefore, a unique opportunity for women to become financially independent. It’s the reason we’re foscuing on this sector due to it’s large potential for scalability and therefore, impact.

As a tech-enabled franchise, Voalá! empowers low-income women to build thriving beauty businesses. Many of them work alone, are highly fragmented with no bargaining power and resources to expand their salon, all while juggling family responsibilities on the side. Voalá! challenges this status quo by offering women:

• A product marketplace with significant discounts
• Social commerce opportunities (direct sales, mini shops) without upfront investment needed
• Certified training and mentoring
• In-person community events

Members of the franchise decrease their costs of business, generate additional income, overcome the challenges of low liquidity and gain essential business and technical skills as well as learning through the Voalá! network. As a result, women not only develop financial independence but also professional confidence.

It only makes sense that Voalá! is lead and co-founded by a female — and serial — entrepreneur herself: Lorena Chacón. She brings more than 25 years of experience in entrepreneurship, technology, cosmetology & health in Guatemala and is driven by a grand vision to empower female entrepreneurs, support them in building thriving businesses and increase their confidence to become successful in their field.

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We get this question often. While many want to compare it to a VC fund, incubator or accelerator (which are all great) it’s important to clarify that venture studios are their very own thing. Although somewhat unknown, they are at the forefront of innovation. Why? The model allows startups to build more quickly and successfully due to its unique advantages.

As of 2023, there were just 877 venture studios in the world. But these venture studios are creating and launching some very successful startups: Moderna, Yelp, Giphy, Hims, Elenas … and even Medium — the site we are currently using — is the product of the venture studio model! In this article we aim to cover what those advantages are and why we chose this model to solve Latin America’s fundamental problems.

General definition

Venture Studios solve two major problems faced by early stage startups:

• Ideation, prototyping, and validation of a product or service being done haphazardly and without the strategic hiring for a dynamic team.
• Funding and mentoring being a scarce resources in the ecosystem.

A venture studio connects proven ideas with experienced entrepreneurs and offers them a venture building methodology, access to shared services (Product Development, Tech, HR, Accounting, Financial Analysis etc.) and funding. Utilizing this approach, venture studios are able to concurrently develop several startups with agility.

So, like an accelerator or an incubator?

Not exactly. Although all three models provide support to early stage entrepreneurs as they launch a startup, the venture studio is the only model that is part of the ideation of a company. As a result, the venture studio is a co-founder of the startups it creates and holds ownership (equity and/or a board role) next to the entrepreneur and other possible investors later on. We often get asked if we at Fundamental generate ideas and solutions by ourselves or if we look for entrepreneurs to bring us ideas. Up until now, we’ve been responsible for the initial ideation and design of the startups we’ve launched.

As such, the venture studio takes on greater risk than accelerators or incubators, as it provides intensive support of resources and funding during the initial venture stages at no cost. However, the pay-off for the risk is often worth it! Venture studios have proven to represent a more attractive asset class than accelerators with higher exit rates (34% vs. 21%) and higher stakes (30–50% equity vs. 7%) ( Global Startup Studio Network, Sparkling Partners, Crunchbase, GAN).

Okay then, what makes the venture studio more successful?

The shared services and access to resources result in following benefits for the startups:

• Collective entrepreneurship: Startups that are co-created in a studio naturally collaborate and learn from each other, as they take part of a bigger community of passionate entrepreneurs.
• Startups created by a venture studio are 3–4x cheaper: The internal studio team supporting multiple startups at once leads to significant savings.
• Culture of ideation, iteration, and continuous rebuilding: Venture studios are focused on solving a problem, and are not attached to one solution.
• Ability to test multiple ventures at once: A portfolio of multiple ventures reduces risk and increases likelihood of success.
• Entrepreneurs can focus on achieving Product Market Fit (PMF): The venture studio initially supports other aspects of the startup (operations, fundraising, technology development etc) so that the entrepreneur can focus on achieving PMF.
• Strong network: Venture studios can help connect startups to the right users, clients, advisors, and investors.

Really? Show me proof.

Recent research shows that startups created in a venture studio:

• Reach seed rounds twice as fast as regular startups, 41% less time for Series A, 44% less time Series B, and 47% less time series C.
• Exit faster: Averaging 5 years, compared to 7.5 years of regular startups.
• Achieve a higher Internal Rate of Return (IRR): x2 for startups created in studios vs. regular startups.

So, how do you leverage this model for good?

Solving social and environmental problems through market-based solutions is complex and poses different challenges than developing purely commercial solutions due to the added impact dimension. Impact focused solutions are often developed in underserved markets and its clients tend to be less researched and invested in, which makes new solutions inherently more risky — something that is harder to accept when the target group is vulnerable.

This is where the venture studio model comes in: it serves as a powerful tool for mitigating risks and amplifying the potential for success in a context where the need for scalable, self-sustaining solutions is high! It’s the reason why we at Fundamental decided to apply this model innovatively to build impact startups that target the challenges of unemployment, inequality and climate change in Latin America.

How do we support the balance between impact and profit as we build impact ventures?

• A dedicated fundraising team looking to apply catalytic capital and blended finance from value-aligned funding partners to support the critical incubation phase of the impact venture building process with eg. grants, setting ventures up for traditional financing later.
• A studio team with extensive experience in both impact and venture building, leveraging their shared knowledge for good.
• Impact serves as a fourth dimension in our Product-Market-Fit assessment to ensure it’s integrated and fostered by the venture’s business model (next to desirability, viability and feasibility).
• Validation and accountability mechanisms through our proprietary playbook that incorporates a stage gate model, enabling ventures to progress through stages contingent upon periodic evaluation gates. These gates are incorporate our impact and business mindset as well as the lessons learned from the successes and obstacles encountered during the development of previous ventures.
• An integrated impact measurement and monitoring system, recently strengthened by a third party, to ensure our ventures stay on track with our commitment to make a real and measurable difference in the lives of our clients and their communities.

That’s..

Hopefully interesting and relevant. Our conviction that the venture studio model has the potential to be transformative is largely thanks to the results, learnings and growth that we have experienced over these past two years. And while we know it’s daring, we do see grand opportunities to create deep and lasting change.

Our ideal is to not just do this through our own ventures but we hope to inspire and get inspired by others, to continue learning and sharing. Please reach out to us if this topic is of interest and you’d like to talk further.

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