Women entrepreneurs have a significantly harder time securing funding for their businesses.
This isn’t a new conversation. As the spotlight continues to shine on gender equality and the wage gap, there’s been increasing emphasis on backing more female entrepreneurs. Yet, the statistics are barely improving.
In 2017, only 2% of venture capital dollars went to startups founded by women. While that was a slight increase from the measly 1.9% in 2016, it’s obvious that women still have a long way to go when compared with their male counterparts.
Why? Many venture capitalists claim that it’s a lack of availability. They can’t support these women-led businesses, because there just aren’t any in the pipeline. But, the 2016 census shows the number of female entrepreneurs has increased by 7.6% in the last 10 years, compared to only a 0.3% increase for men. It also showed that women account for 33% of owner-managers in the country. Clearly, a lack of women-led business to fund can hardly be the case.
So, what’s the deal? Why do female entrepreneurs still get such a small slice of the funding pie?
To find out, we connected with several women business owners to hear about the biggest challenges they faced in financing their businesses.
Challenge #1: Finding the right audience
When female entrepreneurs approach investors, it’s almost guaranteed that they’ll be speaking to a group of men.
This audience makeup presents a problem because bias—whether conscious or unconscious—is real. A Caltech study discovered that male-led startups are almost twice as likely to get funding from male investors than female-led businesses.
The researchers concluded that this is likely due to something called taste-based discrimination. “Male investors simply prefer to fund male-founded companies for reasons that may include outright sexism as well as subtler factors, such as a desire among male venture capitalists to mentor young entrepreneurs who remind them of themselves,” says a Caltech release about the study.
It’s for reasons just like this that many female entrepreneurs choose to bootstrap their businesses and approach trusted friends and family members for financial support.
Sailaja Joshi, CEO and founder of Bharat Babies, a publishing house committed to bridging the diversity gap in children’s books, relied solely on contributions from friends and family (along with a few grants) to fund her business, which was founded in 2014.
Working with these supporters—rather than investors and venture capitalists—not only gave her the funding she needed, but it also removed a lot of pressure from the equation.
“I’m incredibly lucky and very blessed to have that access,” she explains. “Because in the times that it feels dark and hard, these people aren’t screaming at me for a return. Instead, they’re my biggest encouragers whispering in my ear, ‘Don’t give up.’ And that’s really powerful.”
Challenge #2: Making an emotional connection
Because investment audiences are largely male-dominated, female founders have to work even harder to prove the value of their businesses—particularly if they’re targeted toward women.
“When the investor is a man, he doesn’t seem to connect emotionally with the problem that my company is addressing,” explains Diane Smith, founder of ParTAG, a marketplace for rentable goods.
“I think this has been an issue for anyone trying to tackle problems that aren’t shared by straight white males in general. When I get in front of women, they nod their heads and say immediately, “Yes, I get it.” So we can move on from the premise if the problem is worth trying to solve or not, and delve right into how I am doing it and where I am in the process.”
While Smith recognises that these emotional ties don’t make up the entirety of an investment decision (things like market size, revenue, and traction carry weight as well), they are what seem to get the conversation started.
“After realising this, I’ve concentrated my fundraising pitches to funds [and] firms that cater to women and who have women in leadership and deal flow decision-making,” she adds.
Challenge #3: Being comfortable (and confident) with the art of the ask
Many experts cite something called the “confidence gap,” a term coined to explain the disparity between the confidence levels of men and women. Evidence shows that women are far more likely to underestimate their own abilities and qualifications.
This innate self-doubt makes aggressively pursuing funding—something that obviously requires a high degree of self-assuredness—a struggle for many female entrepreneurs.
“It all applies in fundraising no matter who you are: courage, confidence, resilience,” says Jeanne Chung, founder of Mighty Menopause, a digital experience aimed at elevating women as they age. “For women, a deeper and more complex kind of courage, confidence, and resilience is required.”
“So much of ‘asking’ is about asking with intention and confidence,” says Eva Jane, founder of The Makeup Bullet, an innovative cosmetic sponge. “It seems to me that when you have a well-laid plan and tangible motion, people want to jump on a train that is moving.”
“It seems rudimentary and simple,” adds Chung about getting comfortable with asking for what you need. “It’s not. Especially for women. And [it] wasn’t for me.”
Challenge #4: Counting themselves out
According to an internal report from Hewlett Packard, men will apply for jobs if they meet 60% of the qualifications. Women, on the other hand, don’t bother tossing their hats into the ring unless they check 100% of the boxes.
Finding funding isn’t the same thing as landing a job, but it illustrates an important point: Women are quick to count themselves out.
Much of this ties back to that confidence gap. Female founders don’t feel worthy of seeking funding if they don’t have all their t’s crossed and i’s dotted.
“I find myself falling into this trap too and have to tell myself that just because I don’t meet all of their criteria, I should still reach out [and] apply,” says Smith. “What’s that saying, ‘You miss all of the shots you don’t take’?”
The issues that female founders face in securing funding for their budding businesses aren’t small—and this conversation is admittedly too large to even be adequately summarised in a single article.
However, there are valuable lessons to be extracted from these statistics and sage advice from other women entrepreneurs.
The biggest one? Begin fostering your own unshakeable confidence in your business idea. After all, if you don’t believe in your business, how could you possibly convince somebody else to?