Women entrepreneurs run 30 percent of all small businesses, and together employ 7.9 million people and generate $1.4 trillion in sales (as of 2015). Needless to say, these are pretty staggering numbers.
All that success is wonderful. However, there exists an underlying issue that is keeping women from being even more impactful — difficulty finding funding.
Women-owned businesses receive just 7 percent of venture capital investment money, which is highly disproportionate to their role in the economy. Additionally, loan approval rates for female entrepreneurs is 15 to 20 percent less than it is for men. Clearly, something is not right.
Access to capital is crucial to any small business’s growth trajectory. By looking at the reasons for this disparity, solutions can be more easily seen. With so many capable, trustworthy businesswomen in this world, it’s vital for society as a whole to ensure they get equal chance to do great things. Here are the top reasons why women entrepreneurs have a harder time obtaining investments and loans.
It’s hard for any startup.
It’s worth noting that the startup game is a difficult one to get into, regardless of your gender. Venture capitalists, financial institutions and other lenders frequently deny all types of entrepreneurs. Consider this — during the first half of 2014, out of all small businesses that applied for a loan, only half were approved for any amount whatsoever.
So, add in the general challenges small companies face to secure investment along with the unique hurdles women encounter, and you have a truly difficult task. Not only do women have to demonstrate a great business plan, have excellent credit, and demonstrate solid cash flow, they must also successfully navigate through a process that tends to unfairly favor male-run startups.
There is an issue with the profile of a successful entrepreneur.
Candida Brush, a professor of entrepreneurship at Babson College, has an insightful take on one of the main reasons why women don’t get funding — the profile of the successful entrepreneurship is male. If you think about it, this is frustratingly true. When picturing the great business people of today, for many, images of Mark Zuckerberg and Steve Jobs come to mind.
Hence, when investors are approached by women entrepreneurs, there is an unconscious bias that they will not be as reliable an investment as their male counterparts, and therefore not as fundable. To solve this issue, Brush states, “it may be time for the media, educators and funders to recognize that successful entrepreneurs are not all like Jeff Bezos or Bill Gates.”
The way to break this unfair stereotype of the successful entrepreneur is to better highlight the great businesswomen of today — Cher Wang, co-founder of HTC; Arianna Huffington, co-founder of Huffington Post; and Beth Comstock, one of the founders of Hulu and current vice chair of GE. This will help instill in…