Hatty Fawcett (Executive MBA 2003) is the founder of Focused For Business. She raised two rounds of investment for her own business venture and now supports others in raising investment, predominately through business angels and crowdfunding. Here she discusses the challenges facing female entrepreneurs looking for investment:
When it comes to attracting investment female founders find it much harder than men to raise investment but – at last – it seems there is a route to funding at which women excel!
The odds are stacked against women raising investment
Male entrepreneurs are 86 per cent more likely to receive venture capital funding than their female counterparts and men are 59 per cent more likely to secure angel investment than women, according to research from Startup DNA. This makes for surprising reading in a world where we are increasingly hearing about the benefits of diversity.
There are many reasons why women struggle to raise investment
Gender discrimination is still very present in the world of business investment. Shivvy Jervis of Digital Futures summed up the reasons women struggle to raise investment in a recent article in The Guardian. She points out that:
- There are fewer female entrepreneurs than men (just one third of the UK ecosystem is made up of women).
- Bias in the themes and sectors men and women select for their start ups impact on the accessibility of investment. The Startup DNA research found, for example, that few males set up lifestyle businesses and a very small amount of women delve into finance-related ventures.
- Fewer women enter the world of ‘tech’ which traditionally attracts a significant proportion of venture capital and angel investment.
- The influence of the ‘old boys network’ still plays a strong role in the venture capital world and this limits access to investment for women.
- A reticent trait, which suggests women are less likely to shout about their achievements, helps explain why some women are reluctant to pitch to venture capital and business angels.
- A lack of female venture capitalists (just 7% of senior partners in the top 100 venture capital firms globally are women), means there is no counter-balance to male venture capitalists who, evidence suggests, have a subconscious bias towards business models developed and presented by men.
I have also offered my views on this subject on LinkedIn and believe that there is a disconnect between the objectives of traditional investors and female founders which exacerbates the challenge female founders face in raising investment.
But, there is a route to investment at which women excel
Against this backdrop, my heart soared when I read research from PwC and The Crowdfunding Centre: ‘Women unbound: Unleashing female entrepreneurial potential’ July 2017 that shows women are more successful at crowdfunding than men. There is hope for female founders who need investment.
Analysis of over 450,000 seed crowdfunding campaigns across the globe concluded that women-led crowdfunding campaigns were 32% more successful than those led by men. Women were found to be more successful in every geographic territory and sector – even those sectors (such as technology) which, traditionally, attract fewer female founders.
Why women are more successful than men at crowdfunding
The report offers reasons why women are more successful at crowdfunding. What’s interesting is that these success factors appear to be directly contradict the reasons women find it harder to access traditional funding. For example,
- Crowdfunding attracts, recruits and empowers female decision-makers as investors and “micro-VCs” creating a more gender-neutral, level playing field
- Crowdfunding attracts male investors with a greater gender-neutrality who are more likely to invest in female-led projects
- The language used by female founders in their videos and pitched on crowdfunding platforms is more inclusive and, whilst this language may not appeal to venture capitalists, it has been shown to correlate with crowdfunding success. The use of business language, a style more predominately favoured by male crowdfunders in their pitches, has been shown to be negatively correlated with money raised irrespective of what product or service is being pitched.
- Women tend to set more modest financial goals than men but achieve a high average pledge amount than men.
It seems crowdfunding creates a level playing field for female founders and business owners at last! Now all we have to do is seize the opportunity…
Hatty runs Crowdfunding Accelerator, an eight week online programme of workshops and mentoring that makes it quicker and easier for businesses to succeed at crowdfunding. Hatty also offers free Funding Clinics to founders and business owners raising investment