Why are Women Not Receiving the Funding Needed for their Startup to Thrive

by Tegan Fitzpatrick

Only 2.2% of all venture capital investments were given to women founded startups this past year. 2.2%. Let that number sink in. Are investors not confident in the return of investment for women entrepreneurs? Are women not pitching their businesses and products? This may be a part of the problem as only 22% of all startups had women as the founders or co-founders. It is not only that investors are not backing female founded companies- it is also the fact that less than a quarter of all entrepreneurs are women!

Perhaps female founded companies do not perform as well as male founded startups. This is not the case. In fact, according to data from Pitchbook, women founded startups have had a higher average Return on Investment at 30%.

 

So Why are Women Not Receiving the Funding?

Why are women founded startups struggling to get the venture capital investments needed for their businesses to thrive? Because 93% of VC investors and partners are males. This is not to say that the male investors are bias against female CEOs- but because they don’t have a passion or understanding for many of the products pitched. Much like founding your own company- you must have the passion for the product or service. The same goes for an investor. They need to not only see positive financials, but get excited about what they are investing in. Because if an investor cannot relate to a product- like feminine hygiene or bras- they may not fully understand the need for products such as Thinx underwear or the Diva Cup.

 

How do female funded companies get the funding?

  • More women need to be in Venture Capital. This is not an easy solution, but with the increase of professional women in the workplace and the increase in women in executive roles- we will hopefully be seeing more women in the VC investment world.
  • Network. Use the women around you that have begun their own businesses- ask for introductions to possible investors. Getting an introduction will increase your chances of obtaining the investment.
  • Companies like Femalefunders.com are excellent platforms that will give you the tools to get investments for your company. This specific site includes seminars, introduction to experts in your industry as well as investors that specialize in funding female founded companies.
  • Find other sources for investing. SheEO is a platform created by Vicki Saunders that funds female founded start-ups as well as creating a support system and mentorship for women entrepreneurs. To date, 53 ventures have been funded through SheEO- totalling $4.0 million in funding.
  • Create a company or product with male co-founders. Having both males and females on your executive team has led to better financials, creativity, and a higher chance of getting investments.

The playing field between males and female’s business owners is still greatly skewed. However, the number of female founded startups is slowly increasing. This is through women utilizing the tools they are given. Network, reach out to industry experts, take advantage of platforms that specialize in helping women entrepreneurs. This will lead to much more success then going with the traditional ways of funding your company.

 

 

Tegan Fitzpatrick is a business analyst, business writer, and human resource expert. With a degree in Business specializing in Human Resources and Strategic Business Management, Tegan has built a career around assessing companies and guiding them to success.

 

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One Reply to “Why are Women Not Receiving the Funding Needed for their Startup to Thrive”

  1. Susan

    Great article Tegan!

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