Bridging the gender gap in business financing
Only 2% of the venture capital funds available are invested in women-owned business. Is this because we’re not applying for the funds or because VCs don’t invest in women?
Julie Hall, founder of Women Unlimited, on why women need to start learning the language of equity finance
According to a recent report by the Women’s Enterprise Forum, the average amount of money needed to start-up a high-growth business is £120,000.
However, what we find is that while male and female-owned businesses both need the same amount of money to get off the ground, where they get that money from differs greatly. Like it or not, the gender divide exists in financing business start-ups and growth as well as in large corporate environments.
Women most often fill the gap between what they need and what they have to finance their business from a bank loan, with over 60% choosing this route. Very few will go and seek outside investment via a business angel or a venture capital firm.
If you go along to an Angels Den meeting or a pitching event, as a woman you are likely to find that that you are outnumbered by about 10 to one. I know of a few meetings where women have turned up to pitch only to find that they are the lone female in the room.
So what’s going on here? At the moment, only 2% of the venture capital funds available are invested in women-owned business. Is this because we’re not applying for the funds or because VCs don’t invest in women? I suspect it’s a bit of both.
The Women’s Enterprise Forum’s recent GROWE (Greater Return on Women’s Enterprise) report stated that 17% of women don’t understand equity financing, compared to just 4% of men. This doesn’t surprise me at all as I don’t think there is enough going on in the women’s space around creating conversations about funding and financing, though there is certainly more than there used to be.
It’s great to see that there is more and more going on in this arena to encourage women to find out about investment via equity routes. Astia UK, for example, is a global not-for-profit organisation that has come over to the UK in the last year. There are also some female focused funds starting up, like the co-matching £12.5m Aspire fund, and the second Trapezia fund from Stargate Capital, which is currently seeking investors. Then there’s the female angel investment club, Addidi.
But there are also things women can do to support their own business growth and development:
1. Become more risk positive: women tend to be more wary when it comes to financial risk in a business context and while this makes them safe, it can also inhibit their growth potential
2. Build a strong team: find people, both internally and externally, who can help you to grow and take your business to the next level
3. Learn the language of finance: Become familiar with the options available and seek expert advice
4. Think BIG
If anyone is interested in finding out more about financing their business growth, a great resource is the Finance South East programme set up by SEEDA, which has a section focused on women’s business. And keep an eye on the Women Unlimited website, as we will be running a How to pitch for investment workshop in the first quarter of 2010.
Julie Hall is the founder of Women Unlimited, a network for female entrepreneurs in the UK.