“Discriminated against because we have husbands”: How ‘savvy’ business structuring left this startup ineligible for grant support

CircleIn

CircleIn co-founders Kate Pollard and Jodi Geddes. Source: supplied.

CircleIn co-founders Jodi Geddes and Kate Pollard have spent the past three years building, growing and securing funding for their workplace parent engagement startup.

It’s a women-led business, and, as far as they’re concerned, clearly majority-owned by women.

But, when the pair applied for grant funding through the federal government’s Boosting Female Founders Initiative, they were surprised and indignant to find out they weren’t eligible.

To add insult to injury, the reason they were given was that 50% of each co-founder’s equity had been attributed to their husbands.

Geddes and Pollard’s equity shares each sit in a family trust. So, when calculating how much of CircleIn was owned by women, the Department of Industry, Science, Energy and Resources deemed their husbands to be co-owners.

Speaking to SmartCompany, the co-founders stress in no uncertain terms that neither of their partners have anything to do with the running of this startup.

“It was just the biggest kick in the guts to say our husbands own part of our business when we have worked so hard,” Geddes says.

The government’s Boosting Female Founders Initiative grants program has been met with some criticism from women entrepreneurs, after it emerged the 50% women-ownership criteria effectively excluded any business with a male co-founder which has received investment from a male-led business.

But, even for businesses that have only women co-founders, it appears having a business under a family trust is also a problem.

“We like to think we’re savvy female business owners,” Pollard says.

“We’re following best practice in terms of how to set up our financial arrangements, to protect ourselves, and to protect our families,” she adds.

“It feels like we’re being discriminated against because we have husbands.”

The co-founders say they sought legal clarification, and found that, under the way their trusts were set up, they can attribute the equity to whoever they want.

But, when they put this to the government, they got “the same standard reply”, Geddes says.

In the response, seen by SmartCompany, a department spokesperson doubled down on the decision, and encouraged the co-founders to apply next year, saying the department had taken their feedback on board.

For Geddes, that was too little, too late.

She estimates it took the founders the equivalent of a week of full-time work just to submit the application for the grant.

That now feels like time away from focusing on the business — and time that was wasted.

“For us to step away and actually pull this application together was a really big thing, but we saw the opportunity,” Geddes says.

“This would have been instrumental in our global growth.”

Accelerating growth

CircleIn is in the middle of a swift growth trajectory. Founded in 2017, the startup provides online resources and coaching to help employers support working parents in their organisations.

When COVID-19 hit, and remote work and homeschooling became the norm, they were in a position to lend a helping hand.

The co-founders released their Parent Portal in April, and quickly gained traction. Now, the business has clients all over the world.

It hasn’t had to cut staff numbers, or hours, or access JobKeeper support. In fact, CircleIn has been hiring throughout the crisis.

So, it’s not like the business was desperate for a cash boost. It simply would have allowed the co-founders to pick up the pace.

“We like to think it’s a great success story of two female founders,” Pollard says.

“That funding would have enabled us to scale much quicker, and I think that’s what they want.”

The pair are coming out of COVID-19 as better business leaders, Geddes adds.

“We just would have loved a little bit more support from the government, to help realise our vision and also give back by creating more jobs,” she says.

Sensible structuring?

Speaking to SmartCompany, accountant and founder of Healthy Business Finances Stacey Price, says the co-founders had approached their business structure in the right way.

In terms of asset protection, tax planning and consideration of the future, having a family trust is indeed a sensible way to set up a business, Price says.

It was likely the right choice for CircleIn at the time they set it up, and probably still is now. It just doesn’t work for this particular initiative.

“The co-founders were clearly considering the implications of their business structure, and doing what was right for them and their families,” Price says.

“We don’t want them to set up a structure they just plucked from a hat … I applaud them for doing that.”

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Healthy Business Finances founder Stacey Price. Source: supplied.

Price also notes that a family trust is a pretty common way to structure a business.

She started her own business with her husband, who has no involvement in the day-to-day running of things, she notes. A lot of women also start businesses using joint savings.

For Price, the frustrating aspect of the BFF Initiative is that it wasn’t made explicitly clear that women in these circumstances would not be eligible.

“They need to be clear that the incentives are not for all women-led businesses,” she says.

“They’re for a specific category of women-led, or women-owned business.”

Then again, she also says that’s the case for a lot of grants in Australia.

Eligibility criteria will always exclude some people. Often, they exclude a lot of people.

What’s different here is that this grant initiative is being marketed as something that supports women in business.

She’s concerned that this is just lip service, designed to make it look like the government is supporting women, rather than actually supporting them.

“I feel it’s a bit of a token gesture, which is really disappointing.”

Either way, from an accountancy perspective, Price stresses that any business should create its structure based on what is right at that time, rather than trying to second guess what it may or may not be eligible for further down the track.

“We can never, and should never, create an entity structure purely to potentially meet a grant or initiative that doesn’t exist at that point in time,” she says.

For the women-led businesses that have missed out on the BFF funding because of such a structure, there may be disappointment. But, ultimately, they’re better off having the right structure for them.

“I would focus on that,” Price says.

“There will be something else they’ll be eligible for.”

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