Female entrepreneurs are an undeniable force in the global economy, yet many still face fundamental challenges when it comes to securing start-up funding or other types of financing. This article will examine the funding challenges and opportunities facing female business owners.
Yet businesses owned by women have historically attracted much less capital than those of their male-owned counterparts.
Facing Challenges-Although the number of women who apply for and obtain equity capital has increased in the past few years, progress has been slow. According to the U.S. Department of Commerce, women are less likely than men to use venture capital as a source of business funding.* Why this disparity exists isn’t entirely clear. Experts have suggested various possible reasons.
Women lack experience in the equity markets. Women are not as experienced and therefore not as skilled as men at presenting their case to investors. This situation is very similar to what women experienced 10 years ago in terms of gaining access to credit. Lenders and investors alike want to see solid business plans that include realistic revenue, cost, and profitability projections.
Women need to gain visibility in the right networks. Knowing people in the right places and feeling comfortable tapping those resources is essential. These networks often include accountants, attorneys, fellow business owners, and mentors who can assist in crafting business plans and making referrals. The National Foundation of Women Business Owners found that two thirds of the proposals that receive serious consideration by institutional investors come through referral networks.
Not all businesses are candidates for equity investment. Women’s businesses tend to be concentrated in the retail and service sectors — areas that traditionally have received few venture capital or angel investor dollars. Traditionally, high tech, software, and biotech are the types of sectors that have delivered the significant rate of growth that venture capitalists seek.
More women, however, are learning how to pursue equity capital and some investors are beginning to take women-owned businesses more seriously. The increase of women in decision-making positions in traditional equity investment firms is also helping to make a difference for women business owners.
Strategies for Success.- What can you do to increase your chances of securing funding for your business? According to studies conducted by the Center for Women’s Business Research, women who have succeeded in obtaining equity capital share common characteristics:
Today, venture capitalists have an increasing awareness of — and respect for — the different leadership styles exhibited by male and female entrepreneurs. Indeed there is growing recognition that women are fully capable of leading profitable, fast-growth firms. Points to Remember
*Source: U.S. Department of Commerce, Women-Owned Businesses in the 21st Century, October 2010. (Most recent available data.) Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.
Today, venture capitalists have an increasing awareness of — and respect for — the different leadership styles exhibited by male and female entrepreneurs. Indeed there is growing recognition that women are fully capable of leading profitable, fast-growth firms.
Points to Remember
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