Why it is Hard for Female Entrepreneurs to Get Funding?
Ladies, let’s talk about money. Specifically, let’s talk about how hard it can be to get funding for your entrepreneurial dreams. As a financial advisor, I have seen numerous female entrepreneurs struggle to get the funding they needed to start their own businesses. If you’re a female entrepreneur, you’ve probably seen this too. And you probably noticed you had to face some challenges that your male counterparts didn’t. When it comes to funding, the gender gap is still very real.
According to a report by PitchBook, in 2020, female founders received only 2.3% of the total venture capital funding, despite making up 21% of the total number of founders. And according to a Forbes article in 2021, only 2.7% of venture capital funding goes to female-led startups, even though they tend to outperform their male counterparts. Those are pretty staggering statistics, and they raise the question: Why is it so hard for female entrepreneurs to get funding?
The Perception that Women are Riskier Investments
One reason is the persistent bias and stereotypes that women face in the business world. Research has shown that investors may be more likely to view women as riskier investments or less capable leaders, even if the data shows otherwise. Women-led startups have a higher success rate than their male counterparts, yet they receive less funding. Male entrepreneurs are seen as more competent and capable by both men and women. Females are often overlooked and underestimated. Plus, women tend to start businesses in areas such as healthcare, education, and social services. These are considered riskier than the traditional areas of tech or manufacturing. This can make it harder for female entrepreneurs to secure funding, even when they have a solid business plan and a proven track record.
The Gender Gap
Another issue is the lack of diversity in the venture capital industry itself. It is 2023, but the gender gap still exists! Even though women are starting and growing businesses at similar rates as men, this gap has not gone away. And this is true globally. Why is that? One of the main reasons for the gender gap in funding is the lack of women in decision-making roles in the venture capital industry. In fact, only 9% of decision-makers at U.S. venture capital firms are women (Harvard Business Review). This lack of representation can make it harder for females to find investors who understand their unique needs and challenges. Furthermore, the criteria used by investors to evaluate business ideas and potential investments may be inherently biased towards male-led businesses.
The Confidence Gap
Another reason why female entrepreneurs struggle to get funding is the confidence gap. Studies show that women tend to underestimate their abilities and hesitate to ask for what they deserve. As a result, they are less likely to apply for funding than men, even when they are equally qualified.
Women are also less likely to receive mentorship and advice from others. They have a lack of networks and resources that are available to men. It’s easier for men to build confidence when they have people around them that can help them and provide guidance.
These are just a few of the reasons why it is so hard for female entrepreneurs to get funding. The reality is that the playing field is not yet level, despite efforts to increase diversity and inclusivity in the business world. However, by acknowledging and addressing these challenges, we can work towards a more equitable future for all entrepreneurs, regardless of gender or background.
If you’re a female entrepreneur struggling to secure funding for your venture, know that you are not alone. The road may be tough, but it’s important to remember that your ideas and your work have value, and that there are resources and support networks available to help you navigate the financial landscape. Don’t be afraid to reach out to other entrepreneurs, mentors, or financial advisors who can offer guidance and support along the way.
In my next blog post, I will delve into practical tips and strategies for overcoming the obstacles facing female entrepreneurs seeking funding. Stay tuned for more insights and advice on how to level the playing field and succeed as a woman in business.
If you're looking for personalized financial advice and support, we're here to help. As a financial advisor with years of experience working with female entrepreneurs, we understand the unique challenges you face and can provide tailored solutions to help you work towards your financial goals. Contact us today (jennifer.jenkins@bluestonewp.com) to schedule a consultation and start taking steps towards financial success!
https://pitchbook.com/news/articles/how-women-in-vc-see-the-future-we-arent-waiting-for-that-world-to-include-us
https://www.forbes.com/sites/ellevate/2021/02/04/women-founders-and-funders-are-outperforming-so-why-is-gender-inequality-growing-and-what-do-we-do-about-it/?sh=383f3d7357e4
