In honor of Women’s History Month being in March, we’re going to discuss a topic that still exists for women wanting to run and grow their own enterprises. That is, access to capital.
I’m not here to solve a worldwide problem, however it pays to raise awareness, because awareness breeds action, even if only to help a fellow entrepreneur.
You may have experienced or are aware of the gender disparity that exists when it comes to access to capital. When a woman entrepreneur must bootstrap her business, her shot at notable growth is severely limited, at least until she earns enough profit to reinvest in the company. According to the statistics that doesn’t happen very often. Why? Because as we know, it takes money and expertise to scale a company. If she doesn’t have enough of her own money to do that, she needs to use someone else’s. Without the right resources needed to grow, she finds herself sitting on potential that she can’t take advantage of, all because most venture capital investment decisions are made by and for men.
Getting a loan requires skin in the game. If the business is a start-up, and you don’t have a sizable cash investment or other companies you’ve grown to prove you’re bankable, it’s very difficult to find financing. Angel Investors, Crowd Funding or Venture Capital can be the best options for startups, but you still need connections and a strong network, along with basic knowledge of your options. Check out this article that explains the differences.
‘Back in the day’ when I owned and operated several companies with my husband, it was commonplace to be told by my banker that I needed my husband to approve a line of credit draw or add additional accounts, even though we did not have those particular account restrictions. It was like getting a pat on the head and sent on my way (remember the Grinch and Cindy-Lou Who…”run along now, little girl”). It wasn’t until the 1990’s that a woman entrepreneur didn’t need a co-signer for a loan or line of credit for her business. How far we’ve come, yet still so far to go.
I’m going to wrap up this article with some statistics that may surprise you. Access to capital has been and will be a big problem for women entrepreneurs until they become investors themselves. Women investing in women owned business exists, but we’ve got work to do. As with any problem, the greater the awareness of it, the sooner solutions will come.
- The US has 12.3 million women-owned businesses.
- US women-owned businesses generate $1.8 trillion a year in annual sales.
- 40% of US businesses are women owned.
- In Canada, 15.6% of small to medium firms are owned by women.
- Women started 1,821 new businesses every day last year.
- 64% of new women-owned businesses were started by women of color last year.
- Even though women are less likely to receive funding, women-founded companies in First Round Capital’s portfolio outperformed companies founded by men by 63%.
- Just 25% of women business owners seek business financing
- Women owned business only contributed 4.3% of all private sector revenue.
- Women receive just 7% of venture funds for their startups.
Next month, I’m going to talk about some of the nuances between women entrepreneurs and their male counterparts.
Until then, enjoy the Spring!