According to Entrepreneur, women entrepreneurs in the US run 30% of all small businesses, employ 7.9 million people and in 2015 generated $1.4 trillion in sales. But women-owned businesses received only 7% of venture capital investment money. Plus, loan approval rates for female entrepreneurs is 15 to 20% less than it is for men.
Getting funding is one of the main obstacles facing women entrepreneurs, but it is one that can certainly be overcome. There are quite a few ways for women entrepreneurs to secure funding. Here are 5 of them:
Raising financial contributions from the public has grown enormously popular in recent years. In 2012, there were 450 crowdfunding platforms. By 2016 that had grown to more than 2,000. The top three are GoFundMe, Kickstarter and Indiegogo.
Data shows that products and services provided by women entrepreneurs are outperforming men when it comes to raising money through crowdfunding. Hebrew University found that female entrepreneurs are more likely to reach their crowdfunding goals than males. Berkeley-Haas School of Business and the Kellogg School of Management not only found that women outperform men, but they found out why: women have greater ability to tell compelling stories and connect at an emotional level with people, which makes them more likely to want to be a part of an endeavor by providing funding.
2. Angel Investors and Venture Capital
An angel investor is a high net worth individual who invests in early-stage or established businesses, while venture capitalists are companies that tend to invest in businesses that are already past the early stage.
Within the sphere of financing available specifically to women-owned businesses, venture capitalists and angel investors offer the widest range of choices. A variety of angel investment organizations have their sights set on finding the next generation of female business leaders and investing in their success.
If you're a female entrepreneur with your sights set on enterprise-level business growth, one of the angel investment opportunities may be a good fit for your needs. Sometimes angel investment is a great way to get enough traction to capture the eye of a good VC. Other times, angels will continue investing, and you might never need to go to a VC.
Grants could be considered 'free money,' because you don’t have to pay them back. But, they can be a bit more challenging than loans or investment. When considering a grant, take the following into account:
1. You must find a grant for which you’re eligible.
2. Understand their application and compliance guidelines.
3. Understand that you are competing with other businesses for the same money.
4. If you’re awarded a grant, you must report exactly on how you used it.
5. You must devote time and energy to the application process, then wait for approval. Many grant committees only meet once or twice a year and it may take that long to get approved.
Grants may be ideal for women entrepreneurs starting a nonprofit operation but can be more challenging to get for a for-profit company. There are, however, grants available from special interest groups such as the Minority Business Development Agency (MBDA), an agency of the U.S. Department of Commerce that assists minorities and women in establishing and growing their businesses.
If you have good personal or business credit, loans are available. Both the Small Business Administration, and private enterprises have initiatives available. For small business owners seeking under $50,000, the SBA also provides a Microloan program which gives special consideration to women and minority-owned businesses.
In addition to these loan programs, the SBA also offers a Woman-Owned Business Program that provides education and resources such as access to grants, funding, and even federal contracts to businesses that are at least 51% owned and controlled by women, focusing particularly in 83 industries where women are underrepresented.
Seed accelerators, also known as startup accelerators, are fixed-term programs that culminate in a public pitch event or demo day. Accelerators can be either privately or publicly funded and focus on a wide range of business sectors. The application process for seed accelerators is open to anyone and is highly competitive.
Two good resources for more in-depth information about seed accelerators are theSeed Accelerator Rankings Project (SARP), which encourages research about seed accelerators, and the Global Accelerator Network of the most respected accelerators in the world. GAN accelerators provide startups with the resources necessary to create and grow businesses, wherever they are.
Now, more than ever before, women in business have access to many funding and investment opportunities. Plus, there are a growing number of organizations for women entrepreneurs to join and get more information about funding opportunities and other topics related to running a business.
The idea of female-run enterprises, and making funds available to them, is rapidly gaining ground. At this rate, it will not be too long before women entrepreneurs surpass their male counterparts at the investment stage.