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Why do so few women-led businesses reach the same economic scale as male-led companies?
A new report by the Female Founders Forum – a group of female entrepreneurs, including Workingmums.co.uk’s founder Gillian Nissim – looks at some of the issues.
The Forum was set up last year and has been holding roundtables on different aspects of fundraising. This year it is focusing on mentoring. Barclays and The Entrepreneurs Network will spearhead this work, organising speed mentoring events and promoting successful female entrepreneurs.
The report, Untapped Unicorns: Scaling up female entrepreneurship, says research shows male entrepreneurs are 86 per cent more likely than their female counterparts to be funded by venture capitalists, partly because they tend be more highly concentrated in sectors with lower levels of business growth and smaller turnovers. Research also shows that male-run businesses are also 56 per cent more likely to secure angel investment than those run by women.
The report suggests this is partly due to a perception that male-led businesses are “a more bankable investment”. This is despite women-led businesses being less likely to go under, having a more consistent track record and bringing in more revenue with less money invested. The Forum would like to see everyone from female entrepreneurs and venture capitalists to the media, incubators, co-working spaces and accelerators taking action to help ensure women entrepreneurs can secure finance to scale.
Specifically the report recommends action by the Government on areas like improving data collection, tracking women’s progress, developing systems to track and publicise women’s advances in patenting and promoting a more structured programme to encourage female entrepreneurship. It calls on women entrepreneurs to do their best to support and mentor newcomers. And it says the media should challenge stereotypes about women-led businesses, particularly those operating in male-dominated industries; that venture capitalists should promote diversity and consider hiring successful female founders; and that accelerators, incubators and co-working spaces should continue to support women in business.
The report covers some of the points that have come up in its roundtables on funding. These include that banks need to make it clear that they are open for lending and that support is necessary to get more women to become angel investors and to encourage women to ask for the finance they need. In recent years the number of female angel investors has quadrupled and there has been a rise in the women-led angel groups, including the angel network Angel Academe, and training programmes for business angels, but if there were more of them and they were more visible more women might approach them for funding, the report says. Other signs of activity in this area include the setting up of AllBright, a new female-focused investment platform that combines an angel network with a crowdfunding platform.
There has been a lot of focus on how women are using crowdfunding platforms to fund their business, but the report says more women entrepreneurs should also be encouraged to consider peer-to-peer networks. Jane Ni Dhulchaointigh, founder of Sugru, says crowdfunding platforms are often popular with women entrepreneurs because “they’re more interested in your mission, the people behind the business, the founder’s motivations” whereas venture capitalists tend to be more about getting into a room full of men for an elevator pitch and a big focus on the company finances.
The report says this is a concern since companies which receive venture capital appear to grow faster and are more likely to be acquired or go public than those which don’t. Nevertheless, it states that social rather than physical capital is becoming more of an issue. That includes mentors, peer entrepreneurs and access to professionals such as accountants and lawyers. The report suggests women leverage the British Chambers of Commerce’s women’s business networks and groups such as Everywoman.
It concludes: “Female-led scale-ups are no chimera. Many members of the Female Founders Forum have launched multiple, multi-million pound businesses and there is a pipeline of inspirational entrepreneurs hot on their heels. If politicians, the media the venture capital industry and the entrepreneurial community can take heed of our actionable recommendations, Britain can swiftly become the best place in the world for female entrepreneurs.”