By: Leah Virzi
“It is failure that gives you the proper perspective on success.” – Ellen Degeneres
Geri Stengel of Forbes reported that woman account for 36% of all businesses, today. Although they make up over a third of business owners, it is often found that they have the hardest time receiving adequate funds for their businesses. Last year alone, venture capitalists invested in a total of $58.2 billion with male founders, which is a lot of money. Want to know how much money was invested in female-owned companies? According to Valentina Zarya from Fortune, only $1.4 billion. This difference is alarming because this is not something you can just blame on the ratio of male versus female-owned businesses; it just doesn’t add up.
There is absolutely no difference as to how or why women may need funding for their businesses, as opposed to men. Females, like their male counterparts, can receive multiple types of funding, and can use it for many reasons. But why is it so hard for women to receive adequate funds?
Well, we can start with the fact that 7% of partners at the top 100 venture firms are women, according to Teare and Desmond from TechCrunch. This leads to the common theory that the more similar you are to someone, the more likely you will be to take interest in them, it’s basic psychology. But, why is it just dependent on males siding with other males? If a female has a product that a male investor may be interested in, why is there still a bias that leads to decreased access to funding? Well, Jared Hecht from Entrepreneur claims, the biases may be intentional or unintentional; even if the investor bias is unintentional, the ratio of $58.2 billion, compared to $1.4 billion still should not be that extreme.
This extreme difference could be influenced by the amount that women tend to request. Lisa Nicole Bell wrote in Forbes claiming that women tend to ask for less money when seeking funding, because their goals are much lower than those of men; which that fact in itself may seem a bit wild, but psychologically it is the way women are wired. Women are biologically less likely to take risks and more likely to be careful, as well as more caring towards themselves and those around them. Unless my multitude of biology and psychology textbooks have lied to me throughout my years in college, those facts stand to be true. And although nature and nurture equally contribute to the way we behave and function as human beings, women most often grow to behave in such ways, both influenced by biology and society. With the fact that women are less likely to take risks, that leads to the request for lower numbers in funding, and also could lead to a weaker pitch. The sales pitch is what can get you the funding you need and if the confidence in your pitch is inhibited, then you won’t be able to receive adequate funds.
The weaker pitch may also be why male venture capitalists tend to have a bias towards male entrepreneurs, over their female counterparts. But, regardless of the strength of a pitch or sex of the owner, if an investor knows the product could be successful, then they should fund the project to make it happen.
While Lisa Nicole Bell stated that women are more likely to own service based companies, such as hair salons, nail salons, spas, bakeries, and so on; these many services and the industries they are involved in are vital to everyday life. Each of these services equally contributes to the economy in massive ways, because in reality, everyone needs a haircut and everyone likes to enjoy many different types of cuisine. Yes, these products or services may be less expensive to purchase, the low cost of them further increases their likelihood of profitable sales.
A woman will need equipment for her spa, from sinks to top of the line hair styling products, which when purchased in bulk, can cost thousands of dollars. If you are also equating the expense of an industrial oven, stove, or fridge, those all can cost upwards of tens of thousands of dollars. With those examples, it is evident woman too need funding for their businesses, just as much as their male counterparts.
Whether the funding involves equipment financing for the oven that may support the entire livelihood of a bakery, or the line of credit that drives the opportunity to pay someone to advertise and market their company well enough to see a surplus in profits; women who own these businesses need the funding just as much as a man would. To get there, women need to make their presence known, by forming strong, confident sales pitches. They need to ask for more money when looking for funding for their businesses. There also need to be more women encouraged to start their own businesses, to produce a product or service so they can not only improve the economy but also help make strides in the fight against gender inequality in the workplace.
Women owning 36% of businesses, but only receiving 2.4% of what males get, should strike a key. There are many ways women can use these funds, from a term-loan to purchase a store to expand their company, to equipment financing to be able to buy equipment that will provide products to sell, these funds are necessary. Women make up 50% of the population, and although not all of them will go out there and open up their own businesses, the numbers need to increase if women want to close the so-called “gender pay gap.” This is a necessary effort from all parties involved. Investors need to be more willing to provide funding towards female entrepreneurs, whether their bias is intentional or not, and women need to be more willing to put themselves out there. Nature and nurture do side against a female’s tendency to put themselves in risky situations, they need to leap out of the norms if they want to be successful. The future is female. “You get in life what you have the courage to ask for.” – Oprah Winfrey