Access is the biggest barrier to the success of women-led growth companies. One particular challenge is access to equity capital. The statistics show that women-led companies raise far less equity capital than their male counterparts. As a matter of fact, male-founded firms raise capital at a rate of 4 to 1 compared to female-founded firms. Plus, women are less likely to ask their close friends and business acquaintances to invest, and therefore, women-led growth firms are less likely to find the funding necessary at the earliest stages when friends and family are the primary sources. While the number of women-led venture backed firms has increased in the last 10 years, the percentage of funded companies is still less than 20. How can economic developers help women entrepreneurs to gain access to equity capital that will help their firms to grow, create jobs, and generate wealth in the community? Before an entrepreneur can contact a prospective funder, she must have a strong business model, knowledge of the capital raising process, and a solid pitch. Economic developers can help with access to capital by (1) ensuring that programs and services are available in their communities that will mentor women entrepreneurs; (2) helping women entrepreneurs to build an extensive network of contacts (business and industry); and (3) increasing the number of sources of equity capital (angels and venture capital firms) in their communities. Accelerators and incubators provide a proven process for coaching entrepreneurs through business model generation, market research, product development, and funding. Does your community have an accelerator or incubator program that either directs its efforts at women entrepreneurs? Are the accelerators or incubators in your community inclusive, in that they recognize the particular challenges that women entrepreneurs face and provides specific assistance to meet those challenges? Does your community hold events and programs that bring women-led growth companies together to network? Has your community reached out to successful women entrepreneurs, including founders and early team members, and encouraged them to mentor companies? Then, on the funding side, consider how your community can increase the number of women angel investors. After all, 1 in 4 angel investors now are women. That’s encouraging. Creating programs and services that help women entrepreneurs to build strong companies will set them on the path to getting access to capital.
- Improving cluster performance through entrepreneurial support programs
- Second Stage Companies: What’s All the Buzz About?
- Targeting early stage companies with the right entrepreneurial support model (to create and grow successful businesses)
- What is the value of a Startup Weekend? (Hint: It’s not starting businesses.)
- Incubation is the right model for a “Grow Your Own” strategy (Part Two)