Gender equality in funding entrepreneurs could be a boon for the global economy
According to a recent study by Aston University , men are almost twice as likely to become entrepreneurs as women. However over the last decade, the number of female business owners around the world has increased by 45 percent. RS Components have analyzed which countries are leading the way when it comes to female entrepreneurs — you can view the GIF here.
Why then, are such few women (relatively speaking) launching businesses around the world? A report by The Unilever Foundry in February 2018  found that 4 in 10 female founders say they frequently encountered gender bias whilst running their startup, and 42 percent believed that gender discrimination would stay the same as they scale up. It appears then, that cultural barriers are a large part of the issue, with women not being supported or encouraged into entrepreneurship in the same way as their male peers . The Entrepreneurs Network describes how men are 86 percent more likely than women to secure venture capital funding, and 56 percent more like to win the backing of an angel investor. Women also commonly receive fewer and smaller bank loans for their business — along with being charged more for these loans .
There are many benefits to trying to improve opportunities for female entrepreneurs, with research suggesting that closing the entrepreneurship gender gap could boost global GDP by as much as 2 percent, and the ripple effect could go far beyond financial gains . There would be the chance to benefit from new innovations, products, and services on the global market from a segment of the population that has never before been given the opportunity to reach their full entrepreneurial potential. Karen Quintos, senior vice president of Dell  comments, “Unleashing the power of female entrepreneurship can have a dramatic effect on a country’s economy. Research clearly supports the assertion that key things need to be fixed in order for female entrepreneurship to survive and flourish.”
Despite this, there still exists a glaringly obvious entrepreneurial gender gap. Only one-fifth of the six million businesses in the UK are owned by women, and there are twice as many male entrepreneurs as females, despite there being one million more women in the UK . Robert Jenrick, Exchequer Secretary to the Treasury, says that the fact that so few British business are started by women is “shocking” and is not as a result of lack of talent and appetite. Mr Jenrick also comments that untapped female entrepreneurship “may be the greatest economic opportunity of 21st century,” stating that Britain could be missing out on more than one million new enterprises and billions of pounds of economic activity by not addressing issues of the entrepreneurial gender gap .
Fortunately, there are steps being made to understand and tackle the barriers facing women entrepreneurs. In the UK, RBS CEO of Commercial and Private Banking Alison Rose was appointed to lead a government review in September 2018, to identify barriers faced by women when starting a business, and explore what can be done to overcome them . Recently in the USA, President Trump signed into law the Women’s Entrepreneurship and Economic Empowerment (WEEE) Act, a law that strengthens US efforts to promote opportunity for female entrepreneurs worldwide .
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Why are women increasingly funding women entrepreneurs?
Given all the data showing otherwise, it’s hard to believe that institutional funders don’t know that women entrepreneurs have a harder time raising money. For example, investors ask male founders questions related to promotion or gain and female founders questions related to prevention or loss, according to Dana Kanze’s research among TechCrunch Disrupt competitors. The different focus resulted in men raising five times as much as women.
Yet, institutional investors (79%) and bank loan officers (91%) still believe that women entrepreneurs get the right amount of funding or more, according to The Growing Market Investors Are Missing, a report by Morgan Stanley.
Data also show that women entrepreneurs outperform their male counterparts, yet their performance hasn’t attracted the funding they need. So women are using their money and wits in five ways to ensure that women entrepreneurs get funded.
1. Women are becoming angel investors: Between 2004 — the year the Center of Venture Research started tracking angel investors by gender — and 2017, the number of women angels has increased five fold. Of angels who started investing within the last two years, 30% are women, according to The American Angel, commissioned by the Angel Capital Association. “They’re committing a significant amount of early capital to fund women-led businesses,” said Kay Koplovitz, cofounder and chairman of Springboard Enterprises, and managing partner of Springboard Growth Capital. Springboard, an accelerator for high-potential women entrepreneurs, has partnered with Dell Women’s Entrepreneur Network (DWEN) to do a series of Women Funding Women events.
Alicia Robb is an author, academic researcher, and managing partner of several early-stage venture funds through Next Wave Impact. Investors in her funds are mostly executive women plus some exited female founders and scaling founders who intend, when they exit, to become active angel investors. When asked why women join women angel groups and funds, she said “because it’s fun. It also offers a return on your investment and a way to get involved in the entrepreneurial ecosystem.”
2. Venture capitalists get with the program: According to Pitchbook, the percentage of dollars going to companies with at least one female founder decreased over the past five years: from 13.4% in 2013 to 9.8% in 2018. (The percentages differ from the often cited 2% which refers only to all-female founder teams.) Don’t sound the alarm! Shortly, a few trends should make a gradual upward impact on those numbers.
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