Why Female Entrepreneurs Secure Less VC Funding

We explore some of the reasons why female entrepreneurs tend to secure less funding than males.

VC Funding for Women_Female Entrepreneurs

Even though female entrepreneurship is on the rise, male-owned organizations are still receiving the bulk of VC funding deals.

Women are responsible for around 30% of all startups, employ more than 8 million people and are generating about $1.4 trillion in sales yet they’re still only receiving less than 10% of venture capital deals.

Recommended Read: VC Funding Stats for Female Entrepreneurs

Why female entrepreneurs aren’t receiving funding deals

There are a number of different opinions on why women tend to receive fewer funding deals than men.

The numbers

A study by Fundera showed that women ask for roughly $35,000 less funding than men and that the women who do manage to secure funding were more likely to receive short-term loans with less capital and higher interest rates. It’s suggested that this could be because a lot of women have poor credit scores and lower annual salaries so they aren’t always seen as secure borrowers.

The stereotype

In an interview with Entrepreneur Magazine, Candida Brush, a professor at Babson College, shared that she believes that the fact that the profile of a successful entrepreneur is almost always male is a big part of the problem. It’s time for the media to start publicizing the fact that not all successful entrepreneurs are a Steve Jobs or Jeff Bezos.

There is also a serious need for funders and the business world in general, to be educated on the potential of female entrepreneurs and the massive role they play in the success of the economy.

The female funder

The fact that only 7% of partners at top 100 venture firms are women could also be playing a role in the whole female funding debacle. Women are far more likely to fund other women so having more females take on the role of VC funders in the future could start changing things around for future female entrepreneurs.

The perception

Kathryn Minshew, CEO of The Muse, has a different take on why female entrepreneurs receive less funding. She believes that male-and-female-founded companies are judged very differently. Research suggests that women tend to be judged on their performance while men are judged on their potential, which in turn affects how likely they are to receive funding deals.

Funding tips for female entrepreneurs

While finding the right funding deal is still a struggle for many female business owners out there, there are also many great opportunities. Being a female entrepreneur means being resilient, determined, and exploring all possible options.

Here are a few suggestions for increasing your chances of securing funding:

  1. Network as much as possible. Make a note of any and all upcoming events where you’ll be able to network with other female entrepreneurs.
  2. Identify niche loan programs. There are a number of loan programs such as The Small Business Administration that funds female-owned businesses.
  3. Do your homework. This might sound like an obvious tip but you can never be too prepared, whether it’s for a pitch or a simple networking event.
  4. Try peer-to-peer lending. With so many start-ups cropping up, especially technology-based start-ups, there are also more peer-to-peer lending sites that can be used to secure funding. Lending Club and Upstart being two popular platforms.
  5. Identify the right firms. While there are a number of great firms that you can pitch to, rather pick the firms that have a track record of funding businesses in your particular sector or that have funded more female-owned businesses.

Finding funding can be a really tough journey but once you start reaching your goals, it will seem well worth the fight.

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