Women entrepreneurs run almost 30% of all small businesses. It has been seen that, together they have employed millions of people and generated trillions in sales. Surely, these are astounding numbers. Their success is wonderful. Still, there is an underlying issue that keeps women from being more impactful and that is difficulty in finding funding or investors.
Businesses owned by women receive only 7% of venture’s capital investment money. It is highly disproportionate to the role of women in the economy. In addition to that, the loan approval rates for women entrepreneurs is almost 20% less than that of men.
Access to capital is essential for the growth of any small business. By figuring out the reasons behind this disparity, solutions can be easily seen. As capable and trustworthy business women are, it is necessary for society to be sure that they also get equal opportunity to do great things. The question here is why only women entrepreneurs face harder time to obtain loans and investments? Here are some reasons:
Profile Of Successful Entrepreneur
Candida Brush, a professor of entrepreneurship at Babson college has a sharp take on one of the main reasons behind women not getting funding. She says, “the profile of a successful entrepreneur in everyone’s perspective is male. No matter how impossible it sounds, but it is true. While picturing today’s great business people, images of Steve Jobs and Mark Zuckerberg comes to everyone’s mind. Hence, when women entrepreneurs approach investors, there occurs an unconscious bias. Investors think that women will not be as trustworthy investment as their male counterparts.”
To solve this problem, Brush states,” Now it may be the right time for educators, media, and funders to recognize that not all successful startups and entrepreneurs are like Bill Gates or Jeff Bezos.”
To break this unfair convention of the successful entrepreneur, the most effective way is to highlight today’s great businesswomen such as Cher Wang, co-founder of HTS; Beth Comstock, current vice chair of GE and one of the founders of Hulu; and Arianna Huffington, co-founder of Huffington post. This would help recognize that women have also proven themselves as successful entrepreneurs.
Venture Capitalists
There is a tendency for venture capitalists to support and invest in startups run by only those people who share any direct or indirect connection with them. The problem with this tendency is that the business, as well as the political world, is still dominated by men.
In the world of venture capital, 89% of investors are male and favor those with whom they share any connection such as same college fraternity, family ties, nationalities, etc. Because of this, women entrepreneurs often get overlooked for funding.
Still, 11% of venture capitalists are women. Firms with female partners or co-founders invest in startups run by women at a higher rate. Here, the key for women to succeed in business is networking and finding lenders and investors that have the primary focus on financing women-run startups.
Intentional and Unintentional Bias
For a minority of women entrepreneurs, the funding issue is further intensified. In America, black women own around 1.5 million businesses that generate $44 billion every year. However, black females only get 0.2% of venture capital investment. There are several personal experiences which show the difficulties that minority female entrepreneurs face to get funding.
Kathryn Finney, a black female entrepreneur who is a highly successful Fashionista said, “I had a venture capitalist telling me that he didn’t do this black woman thing.”
There are many other women that have run into this discrimination under venture capital funding. But the truth is that minority women are representing the fastest growing entrepreneurs group across the country.
Both unintentional and intentional discrimination have limited access to women entrepreneurs to have funding. It is evident that greater push is needed to break down all these barriers. Lenders, Investors and all other financial firms need education on women’s potential to improve the business world. It is also clear that investors and lenders need greater awareness on how these discriminations get in the way of progress and opportunity for women as well as for themselves.
At Last,
Despite all these obstacles, the number of female-owned firms has increased to 68% since 2007. Statistics like this indicate the progress and paths ahead for women entrepreneurs. It is true that difficulties in getting funding cannot be fixed overnight, still, there are many ways to overcome these issues. Women need to be resilient, fearless and explore every potential option. Another avenue to get funding is to increase networking with other women entrepreneurs. There are grant institutions and angel investment firms that specifically lend to women. In addition to that, there are lots of funding sources like peer-to-peer lending sites.
Resourceful women entrepreneurs should target their investors and get the funding they need to start building their dreams.
