Access to finance is often critical for the success or continued progress of any entrepreneurial venture. However, women entrepreneurs often face many more challenges when it comes to securing funding compared to their male counterparts. At times, if you are a woman entrepreneur, especially if you are a minority woman entrepreneur or a woman solo-entrepreneur, it can feel like the odds are heavily (sometimes even impossibly!) stacked against you.
Entrepreneurship, start-up ecosystems and private investments are the wild west. There are no fancy HR departments, or diversity policies, or sense of morality intrinsically baked into the culture. It is an environment fuelled by the promise of money and a juicy exit for investors, and where there is no perceived reward or benefit to invest in women, oftentimes the outcome is decidedly unfair ... and leads to unequal outcomes, even when all other things are equal.
Investors should invest in businesses that will provide a return. No one expects them to invest in a bad investment. However, the problem is that there is a discrepancy here between the assumption that women will do a worse job than their male counterparts, and the reality, which is that women run businesses pretty well, thank you. Start-ups with a female founder outperform all-male teams by 63%. And if an investor's dream is investing in a unicorn (start-ups that have achieved a billion-dollar valuation), then they should not dismiss women, because female-founded startups make up around 14% of all unicorns - a disproportionate number as compared to how much investment they receive.
The stats are pretty dismal and speak for themselves as to where we are right now though. A recent study by Enterprise Nation found that all-women teams receive only 2p of every pound of funding, as opposed to 85p for all male teams. It is particularly galling that, when a man is on board, the success rate of fundraising shoots up. In a TechCrunch article, it was found that the percentage of funds raised increases when an all-women team turns into a team with “at least one women founder,” implying the underlying prejudice behind the decision-making - a perception that a man will increase the success or safety of the project and/or all women teams are less competent. The stats are that all-women teams raised 1.9% of VC funds last year, a percentage that increased to 17.2% when the team was mixed-gender. This trend has been consistent for a decade.
I am not one for being a victim of circumstance and, like any entrepreneur, it is in my nature to battle through every obstacle, push through every perceived barrier, not be a quitter or a complainer and pull on my big girl pants - because, to an extent, everything is a challenge to be conquered in entrepreneurship.
But it seems that where finance is concerned, the stakes are too high to just rise above and make the best of it. It is the difference between success and failure, being able to fairly compete on a level playing field with VC-backed male founders, and having to pack up and go home. Simply speaking, in a start-up culture that favours capital-intensive technology-based business, high marketing barriers to entry and a swiftly moving and brutally competitive environment, we need money.
As well as that, women-owned businesses that are able to secure financing may be able to take advantage of opportunities and scale up more quickly than those that do not have access to funding. And in order to compete you need to scale quickly. In the modern world winner takes all, and the first mover often is the one who wins. Additionally, access to finance can increase the credibility and visibility of women-owned businesses, which can help to attract customers, investors, and other stakeholders - the very fact that a business was invested in increases its perceived value. It is a public endorsement of the business, and much-needed PR, whether deserved or not.
The reason I have focused on this issue is that entrepreneurs and small businesses make up the backbone of every economy. We can advocate for equal pay, and for more women in boardrooms, but until we have more women founders and owners, there is still going to be a massive divide when it comes to who really holds the reigns of power in our economic system. Because unless you own stuff in a capitalist system you are not really 'in charge' and the best way to own assets is to create them - that means starting a business and retaining at least a portion of the ownership of that business. Also because culture and change travel downwards, women entrepreneurs who succeed become Angel investors who are more likely to understand a women-run business and who therefore expand women's access to finance further. That is why we need this to change and to gain much more momentum.
Gender bias is often at the heart of why women founders are so short-changed (literally!) when it comes to successfully raising finance. For women entrepreneurs, gender bias can manifest in a number of ways. Investors may be more likely to invest in businesses run by men because they undervalue the potential of businesses run by women, or they undervalue women in general.
It may be because women are perceived as having less free time, as being more challenged by childcare and family responsibilities, perhaps considered more 'emotional', less logical when making decisions, less able to manage finances, or even less intelligent or organised. This can result in women-owned businesses receiving less funding than male-owned businesses, even when they have the same qualifications and experience and even when they are pitching the same business idea, at the same phase of development, and with the same level of traction or milestones achieved
I have seen women being refused funding because it's 'too early' or because they lack 'traction' or there is a 'lack of founder fit' - but then have seen male-founded startups, which are exactly the same, that appear to suffer from the same issues, that manage to raise millions on the back of a flimsy pitch deck. All too often the reasons investors provide for their rejection are evidently just excuses to not invest in a women-run business. We need more transparency in how these decisions are made - and for investors to question whether they would reject the proposal if was presented to them by a man.
In future, maybe one way is to send anonymised decks through to decision-makers and for investors to only accept those, so as to not inadvertently allow themselves to be influenced by the name on the deck.
Another solution is to have clear, transparent policies on investment criteria, especially outlining the circumstances in which they will invest in pre-revenue, pre-MVP start-ups, which may require the most subjective type of decision-making. I acknowledge this is, to an extent, an art rather than a science, in some respects, but surely we should be able to establish some consistent policies so we know at what stage we can pitch and what we need to demonstrate to succeed. This would help everyone, not just women.
The private investment space is one part of the problem, but a lot of times women also lack other means of getting finance which compounds the problem. Typically women have less savings, lower salaries, more dependents and less collateral to use for loans. As well as this, they have less tangible family support (for example inheritance, loans given by friends or trust money) or networks to call upon to provide that initial 'friends and family' money that enables so many businesses to get started. But even when they are able to get some initial help, at some point a business owner's capital requirements will outstrip their ability to bootstrap, no matter how resourceful they are, or how helpful their immediate network can be.
There are several strategies that can help women entrepreneurs overcome the challenges they face in accessing finance. One strategy is to seek out investors who are specifically interested in supporting women-owned businesses. There are a number of venture capital firms, angel investor groups, and crowdfunding platforms that focus on supporting women entrepreneurs. I am so grateful for the brave women who are paving the way for more of us and for the women Angels who are putting their money where their mouth is.
Another strategy is to apply for grants and loans targeted towards women entrepreneurs. Grants are one way in particular that you can access finance in a set-up that is hopefully more inclusive, transparent and fairer to women and minorities than private sector investment.
Building networks and relationships with other entrepreneurs and investors can also be helpful. Joining a women's business group or networking organization can provide opportunities to meet potential investors and learn from other entrepreneurs. It can also provide a sense of community and support, which can be helpful in overcoming the challenges of starting and growing a business. An introduction goes a long way.
Success stories of women entrepreneurs who have overcome gender bias and achieved success in business can serve as inspiration and motivation for other women entrepreneurs. But those kinds of businesses are outstripped by capable and hard-working women with dreams as big as any man, that have been denied for far too long. The truth is women often have to knock on far more doors, and demonstrate more traction and resilience to prove their credibility and business idea, to a far greater extent than male founders, before they catch a break.
For my fellow women entrepreneurs, this is not an excuse to quit. Carry on, even though it's hard. The good news is that women-led businesses that do get past the initial hurdles, may end up in a situation where they can get financed at a higher valuation and get better terms when the business is a little further along - which seems a fitting way of getting some justice for the initial pain. It may mean you end up self-funding or growing organically for a time, which can also mean you end up owning more of your company in the end.
If you are a woman and you've made it, pay it forward and help - invest in other women-led businesses!
If you are a man and an investor, we are not asking for a favour, but please question your implicit biases and maybe set out some transparent policies so it's a level playing field for all pitches and ask for anonymised decks - this small change will help create less bias at the outset.
When you interview women or ask them to pitch, make sure you ask the same questions of women in pitch meetings, as you do the men. And don't let the first question you ask them be whether or not they have kids (it happened to me!) - rather assess their work ethic and their accomplishments as a whole, instead of assuming what that will look like based on their gender, whether they have kids or not, or whether they even want them! Would you invest in a man based on whether or not he was a father, whether he wanted to be one .... or not?
All we are saying is to treat us the same, apply the same criteria, and eliminate your bias. It's not that hard.
What do you think? How can we get women better access to funding?