Female Entrepreneurs Fight the Funding GapPosted on August 9th, 2019
It’s sad but true: women who start their own businesses are still struggling to access the financing options available to men. All Raise, an organization dedicated to increasing diversity in tech and entrepreneurship, has found that only 15% of available venture investment goes to businesses with at least one female founder. For businesses founded by all-female teams, that number drops to 2%.
Why? There are a number of contributing factors, including the different types of questions investors ask male and female founders, as Dana Kanze explores in a fascinating TEDx Talk. Another telling pair of statistics reveals that only 9% of venture capitalists are women, and 74% of US investment firms don’t have any female partners.
Now, successful female entrepreneurs are fighting back in an effort to fix this disparity.
Women Empower Women
In an article for Forbes, digital media and market research entrepreneur Geri Stengel explores the ways in which women are helping other women access the funding they need to start and grow successful businesses. She notes that, in an encouraging trend, many more women are becoming angel investors. In fact, the Angel Capital Association has found that of angel investors who became active in the last two years, 30% are female. When women enter the investment arena, they use their personal experiences and connections as fuel to empower other women. “They’re committing a significant amount of early capital to fund women-led businesses,” Stengel reports.
Stengel also sees growth in the venture capital community, noting that recent trends including focused recruitment of female fund managers, women starting their own firms, and a surge in “gender-lens” investing will help to lessen gender-based investment gaps in the future.
Women Create Financing Alternatives
With venture capital and angel investors seemingly out of reach, many female founders have found success by embracing crowdfunding, community funding, and other investment models. In fact, many crowdfunding sites were founded or co-founded by women, including Kiva and Indiegogo. Some sites and companies, like SheEO and iFundWomen, specifically address the funding needs of women-led businesses and are women-led themselves.
Stengel writes that recent laws have helped create new pathways for female entrepreneurs through the investment crowdfunding and debt crowdfunding spaces. “Improvements to the law are needed,” she notes, “but, even so, female founders are creating companies that take advantage of regulations to form companies that provide financing.” These include recently launched platforms such as Portfolia, CFund, and Crowdfund Mainstreet.
Women-Led Businesses Succeed
There are other options for female entrepreneurs seeking the funding they need to start and grow a business. Anita Campbell writes for SmallBizTrends that some of the top sources of funding for women-owned businesses in 2018 included SBA loans, microloans, and business lines of credit. While even these funding sources show some disparities between male and female applicants, they are good options for female entrepreneurs to consider.
There’s some good news for women-led businesses, too – one study of data from businesses that received venture capital through the First Round 10 Year Project found that female founders outperformed their male peers. “Our investments in companies with at least one female founder were meaningfully outperforming our investments in all-male teams,” they discovered, “Indeed, companies with a female founder performed 63% better than our investments with all-male founding teams.”
Another study, the 2018 State of Women-Owned Businesses report celebrates the enormous progress that has been made over the past decade. Their analysis of data from 2007-2018 revealed that the number of women-owned businesses “surged 58%, while all businesses increased only 12%.” In addition, “total employment by women-owned businesses rose 21%, while for all businesses it declined 0.8%,” and the “total revenue of women-owned businesses jumped 46%, while revenue for all businesses increased 36%.”
Clearly, investing in women-led businesses is a smart strategy, and one that investors are quickly catching up to.
A woman-owned business, e2E, LLC celebrates and supports female entrepreneurs and small business owners. Whether you’re seeking advice on securing investment, managing capital, or other strategies to start or grow your business, we’d love to hear from you! Contact us today to learn more.