Why female entrepreneurs struggle to access capital
For a very long time, there’s been much commentary around "gender issues" in corporate life. Some of us have been working at this for decades and are still shocked by the lack of progress.
But gender issues in corporate life are now affecting another newer sector – women entrepreneurs – who are similarly disadvantaged by a gender bias when it comes to money, or access to it.
While the reasons vary, the statistics are startling. So do women still struggle to access capital?
1. Difficulty in accessing finance
Women-founded business have great difficulty in accessing capital and therefore receive a small proportion of venture capital invested – a challenge not unique to the Australian market. The Diana Report provides evidence of this from the US where only 3% of venture capital funding went to companies with female chief executives, reflective of the fact that only 4% of senior venture partners in the US are women.
2. Starting with less capital
Evidence shows that women aren’t as good as men at asking for capital, that women typically start their businesses with less capital and therefore underperform in terms of assets, revenue, profitability and survival. A 2013 study conducted by the Australian Women Chamber of Commerce and Industry (AWCCI) found that half of those surveyed required more funding to facilitate the growth of their business. The majority of those women have started their venture with less than $5000 worth of capital.
3. Not seeking the right amount of capital
There is evidence from an Ernst & Young report that women tend to seek loans too small to meet the needs of their businesses and have a tendency to understate their business potential and be more risk averse when contemplating seeking investment.
4. Terms of investment: same. But application of prerequisites with women is often not.
There is still an expectation at the investor level around quality of the entrepreneur’s track-record, their network and their personal relationships in securing investment. The problem is often women are judged more harshly, or assumed less capable.
Informing women about where they can go to find the capital, tools and techniques to overcome unconscious bias when accessing those finances is critical for their success, which is something Springboard Enterprises Australia (SBE) Australia (of which I'm Chair) aims to address. Our annual Accelerator program connects female entrepreneurs with a high-value network of advisors, industry experts, influential business leaders, investors and alumni to open up capital-raising and coaching opportunities to take advantage of these connections.
Participants undertake an intensive two-day boot camp and a two-month coaching program designed to help their businesses become more investor-ready. All participants are taken through a coaching process to improve their business proposition and their pitching skills, so when they are connected to investors their chances for success in securing an investment are maximised.
This article was originally published at Women's Agenda.