Securing funding outside of the major entrepreneurial hubs is challenging for all founders, but more acute for women. The data show that while women founders launch 20% of start-ups, they receive only 3% of venture funding awards and 9% of seed funding ones.
According to the Kauffman Foundation, there are three primary reasons for this funding disparity:
• Women tend to be in industries that are less growth oriented, less attractive to bigger equity investors such as retail and service.
• Women tend not to have formal social network access into substantial sources of financial capital, and are therefore less likely to seek/obtain equity investment from angels/VCs.
• The predominance of male decision makers at the VC firms leads to a situation where ideas may not resonate with these equity investors.
And yet, evidence is building that women’s involvement makes for a better outcome in the start-up space:
• Venture capital firms that invest in women-led companies outperform those that don’t, according to the Small Business Administration Office of Advocacy.
• Venture-backed companies that include more women on their senior management teams are more likely to succeed than companies with men-only teams, according to Dow Jones research.
There are more and more organizations tapping into the opportunity to focus on female entrepreneurs. Their efforts will be an important factor in closing the funding gap and helping more female-led startups to succeed.