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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