Why Female-Led Businesses Struggle to Secure Funding: Insights and Tips for Female Founders Seeking Investment

Why Female-Led Businesses Struggle to Secure Funding: Insights and Tips for Female Founders Seeking Investment by Stephanie McKinney originally posted on LinkedIn

(Subscribe to her Podcast and Newsletter to receive more tips and advice for female entrepreneurs!)

Is your business investment ready? Despite making up almost half of U.S. businesses, and employing more than 8 million people, female entrepreneurs receive just 2 percent of all venture capital. So the answer to the previous question is probably no. Clearly, there’s an imbalance when it comes to funding women-led businesses. But why? What can women do to change it? And most importantly, what can you do to make your business investment ready?

Whether you’re just starting out or are looking for ways to grow your business, finding the right investors is key. So what makes female-led businesses so attractive to investors? And how can you make your company more appealing?

There’s no doubt about it – female-led businesses are crucial for the growth of the global economy. Yet, despite their importance, these businesses continue to face significant barriers when it comes to accessing investment capital. In this blog post, we’ll explore some of the reasons why female-led businesses struggle to secure funding, and highlight some initiatives that are working to change this. We’ll also share tips on how female founders can boost their chances of securing investment. So read on for insights and inspiration if you’re a woman with an exciting business idea!

Why Do Female Investors Struggle to Get Funding?

There are a number of reasons why female-led businesses struggle to secure funding. For starters, women often have a harder time getting their businesses off the ground in the first place. They face greater obstacles when it comes to accessing capital, and they’re also less likely to receive mentorship or guidance from investors. And even if female entrepreneurs can get their businesses up and running, they often find it difficult to break through the “glass ceiling” that limits their success.

One of the key reasons why female-led businesses struggle to secure funding is that they often lack access to networks and resources that are typically available to male founders. For example, it’s been shown that men are more likely to receive mentorship and advice from people in their personal and professional networks, which gives them a significant advantage when it comes to seeking out investment.

Female founders also tend to face greater challenges when it comes to pitching their businesses to potential investors. Studies have shown that male and female entrepreneurs are often evaluated differently by investors, with female founders being more likely to be perceived as “risky” investments. This bias can make it difficult for female-led businesses to secure the funding they need to grow and scale.

In their article Women Founders And Funders Are Outperforming, So Why Is Gender Inequality Growing, And What Do We Do About It? Written for Forbes By: Eli Walker and Sophia Platt they state “Women founders are outperforming their male counterparts. Yet, not a week goes by without another headline about the growing gender gap for both founders and funders. Quarterly venture funding for female founders dropped to a three-year low with women getting only 2.7% of the VC dollars despite the average annual revenue from women-led businesses increasing by 68%.

Shockingly, only 5.6% of US-based VC firms are women-led, and only 2.4% of all VC partners are women. There is strong evidence that proves female-managed US funds outperform all-male rivals, even when accounting for risk and COVID-related market swings. Of all US VC firms that ranked in the top quartile between 2009 and 2018, 69.2% of them had women in decision-making roles.

In spite of this compelling data, it will take two and a half centuries for female fund managers to achieve equal status to their male counterparts at our current rate of progress.”

Introducing Navigating the Waters with River VC CEO Stephanie McKinney

It is this inequality that drove Stephanie McKinney to found River VC and launch her new podcast Navigating the Waters.  In the first episode Stephanie explains her purpose was to invest in start-ups from a female perspective, but when she dove into the VC world, she realized that there were not many women investors and the landscape for female founders seeking investment was significantly out of balance. She wanted to increase their value and voice by starting up navigating the waters to share expert advice and actionable tips to help demystify investment and create a supportive community to champion the much needed change in gender imbalance within the investment sector.

You can watch the full episode at https://www.youtube.com/watch?v=ZVN6JUAjnUU

Fortunately, there are a number of initiatives working to change the landscape for female-led businesses. For example, organizations like SheEO and Female Founders Fund are dedicated to supporting and investing in female-led businesses. And programs like #500Strong are helping to connect female founders with the resources and networks they need to thrive.

So if you’re a female founder with an exciting business idea, don’t let the challenges discourage you! There are plenty of resources and support available to help you succeed. Here are a few tips to get you started:

– Make sure your business is pitched in a way that investors will understand. Investors are often looking for businesses that have a clear and concise value proposition.

– Seek out female-focused investment funds and resources. As mentioned above, there are a number of organizations that are dedicated to investing in female-led businesses.

– Stay connected to your network. Leverage your professional and personal networks to access advice, mentorship, and resources.

The landscape for female-led businesses is changing, and with effort and perseverance, female founders can overcome the barriers that have been preventing them from securing funding.  By utilizing the resources and tips mentioned above, you’ll be well on your way to making your business idea a reality.

There are a number of reasons why female-led businesses struggle to secure funding.  One key reason why female-led businesses struggle to secure funding is that they often need to grow and scale faster than male-led businesses in order to be attractive to investors.  This is due to the fact that female-led businesses are typically starting from a lower base of operations and have less access to capital. As a result, they need to achieve a higher level of growth in order to be attractive to investors. 

Another is that women are more likely than men to be running businesses in sectors that are seen as high risk by investors. This includes sectors like healthcare, education, and social services – all of which are vital, but which don’t tend to attract the same level of investment as more ‘traditional’ areas like technology or manufacturing.

How do you get investment as a female founder? 

It’s a question that doesn’t have a simple answer, because the answer is: it’s complicated. And it’s something that female entrepreneurs are still grappling with, despite making up an increasingly large proportion of business owners around the world.

There are a number of factors that contribute to the difficulty female-led businesses face when trying to secure investment. One is the “gender investment gap”: the fact that women receive far less venture capital than men, even though they are starting and growing businesses at similar rates. This gap exists in nearly every country and region, and it means that female founders have to work much harder than their male counterparts to get funding.

Another challenge faced by female entrepreneurs is unconscious bias among investors. Studies have shown that both male and female investors are more likely to invest in companies led by men, because they tend to view male entrepreneurs as more competent and capable than female entrepreneurs. This bias can lead female founders to be overlooked or underestimated, regardless of the strength of their business idea or track record.

So what can be done to level the playing field for female-led businesses? One important step is increasing the visibility of successful female entrepreneurs, so that investors can see that women can indeed create and grow successful companies. Another is working to change the culture of venture capital firms, so that they are more inclusive of women and other underrepresented groups. And finally, it’s crucial to provide support and resources specifically for female entrepreneurs, so that they have access to the same opportunities and networks as their male counterparts.

If you’re a female founder looking to secure investment for your business, we hope this blog post has given you some insights and inspiration. Remember that you are not alone in facing these challenges, and there are people and organizations working to level the playing field. Stay focused on your goals, keep networking and pitching investors, and don’t give up! With perseverance and determination, you will find the right investors for your business.

Subscribe to our Podcast and Newsletter to receive more tips and advice for female entrepreneurs! And be sure to check out our other blog posts for more insights into the world of startup funding. Thank you for reading.