Despite the rising number of women entrepreneurs during each era, a lot of challenges still characterized their efforts to launch and sustain a venture. One of the most important issues has been accessing capital. Funding opportunities have had a very significant role in determining the entrepreneurial environment for women and, indirectly, the scope of their ability to launch and sustain a venture.
Women were locked out of the business world in the early 20th century. Society deemed it unfit for women to spend their days at home, and therefore, some time for entrepreneurship was left redundant. Over time, women’s rights began to be fought and won by women in all sectors, including the business sector. The need for funding remained a serious hindrance to these new participants in the business world.
This trend became more pronounced in the 1980s and 1990s, mainly as more women joined the workforce and ventured into entrepreneurial initiatives. Reports from the National Association of Women Business Owners (NAWBO) indicate that, as of 1988, approximately 5.4 million women-owned businesses existed in the United States. Today, this number has skyrocketed to nearly 13 million by 2019. This trend emphasized how much women’s abilities at entrepreneurship were being regarded. Financial support, however, remained inadequate.
Statistics reveal that women entrepreneurs have a tough task when it comes to accessing finance, being generally at the bottom when compared to their male counterparts. A recent report from PitchBook finds that as of last year, just 2.3% of the venture capital funding in 2020 went into women founders’ pockets.
This reality is a stark reminder of some of the systemic bias and stereotypes that affect access to these significant financial resources. Women who do get funding find that the amounts are relatively smaller than those received by men. A study by the Kauffman Foundation reported that female founders raised an average of about $935,000 in venture capital funding compared to the male founders, who received a mean value of $2.1 million.
Lacking sources of funding, historically many women entrepreneurs have gone to personal savings or family and friends’ loans. Although these sources may provide seed capital, they often fall short in the goal to scale a business. Even more, there is added stress that comes with this pressure to repay such loans, not to mention the fact that it effectively limits growth potential.
Recently, however, it has been viewed positively that consideration of grants for women who are entrepreneurs. Organizations focused on women entrepreneurs have been identified. They will offer grants and even mentoring and networking. Examples of such programs include Women’s Business Enterprise National Council (WBENC) and crowdfunding platforms-are one source where getting access to capital becomes easy for women. Resources that give financial support and facilitate community for the woman entrepreneur exist.
There is increased recognition of the value diversity in entrepreneurship brings from investors. Diversely led companies execute better financially since research highlights that companies with more women at the top executive positions outperform male-led counterparts by 21%. This realization encourages investors to rethink their funding approach and to start supporting businesses led by women.
Much remains to be accomplished, however. Female entrepreneurs remain at the receiving end of biases, especially when pitching ideas. There are numerous such case studies where skeptical potential investors raise eyebrows over ideas’ viability. However, with growing stories of success and awareness about the need to support women in business, there is a great positive change ahead on the horizon.
In short, while historical barriers place a dampener on funding for female entrepreneurship, recent trends prove an upward trend for the support and recognition that women entrepreneurs gain. The journey is far from over, but continued efforts from organizations and investors alike ensure that women will, too, leave their marks on the business arena. All in all, addressing funding disparities and creating a room where every entrepreneur can breathe and make himself comfortable establishes the pathway for a very fair future where everybody has equal ground to succeed.
