I don’t know if
you watch the Oscars, or like me, go to a party having barely seen any of the
movies. I am usually pretty bored with
the thank you speeches from the winners, but this year one acceptance speech
got my attention. It was the speech from
the winner of Best Actress, Frances McDormand, for her role in “Three
Billboards Outside Ebbing, Missouri.” Referencing
women in the audience who “had stories to tell and projects to finance,” she
said, “don’t talk to us at the parties tonight, invite us to your office in a
couple of days…..and we’ll tell you all about them.” She asked the women to stand and told Meryl
Streep, “if you do it they’ll all do it.”
The speech
caught my attention because women entrepreneurs in all industries including
Hollywood share the same vexing problem – access to capital. A damning statistic, women only receive 4% of
all commercial loan dollars and 2% of venture capital, shows women
entrepreneurs struggle with obtaining adequate capital. Yet, over 36% of businesses are women-owned and
are growing at four times the rate of businesses owned by men, so it appears
there is no shortage of women seeking operating or investment capital.
Asked why women
get so little VC money in Fortune article,
Julie Wainwright, Founder and CEO of a consignment website The RealReal, thinks
it comes down to the lack of female VCs. “When you have different businesses
that aren’t proven that may appeal more to a female [customer], a female
investor is going to be able to evaluate that” better than a male investor
could, she says. “I think in general, most VCs are trying to do their jobs, but
there are a lot of unconscious biases.”
A study
from Harvard Business Review also points to an additional reason for this
deficit — male and female entrepreneurs are asked different questions by VCs,
which in turn affects the level of funding they receive. According to the study, when investors asked
male entrepreneurs questions they used a promotion orientation, meaning they
focused on their hopes and achievements. Alternatively, when questioning women
entrepreneurs, they mostly used a prevention orientation, which focused on
questions regarding responsibility, security and vigilance. Researchers found that this has a substantial
impact on funding outcomes, thus helping to explain the large disparity in VC
funding for women entrepreneurs.
Given these barriers, why are so many women starting
businesses? It seems to boil down to two
reasons: they were either inspired or frustrated. Inspired because they had a good idea, built a
better “mousetrap” or decided to create wealth for their families by taking the
risk of entrepreneurship. Frustrated became they weren’t getting equal pay for
equal work, were tired of a hostile work environment or saw no ability to
advance.
A case study by the National Women’s Business Council highlights
both of these. The study examined
reasons why women become necessity entrepreneurs and of the 9 women interviewed,
8 cited gender-specific issues, thus making entrepreneurship a necessity. The study also highlights the financial need
as the driver to start businesses. “I
can relate to many of these women because I’m a prime example of a necessity
entrepreneur,” said Kari Warberg Block, NWBC Council Member and Founder and CEO
of EarthKind®. “I was fresh out of
alternatives with no job options, and I had to do something, anything, to take
care of my family. I had an idea to create a safe, natural option for pest
control, and 10 years later that has turned into a $20 million-dollar
business.”
What are some of the solutions to this vexing
problem? Unfortunately, there is no
silver bullet but rather a host of solutions necessary to turn this tide. For starters, investors and lenders can start
asking the right questions and including women in their review process. Women who sit on the boards of these
companies can monitor lending/investing in women owned companies. And on the policy front, WIPP’s Economic
Blueprint suggests a host of policy changes that will help. They include understanding the data from
lending institutions with respect to lending to women, freeing up a regulatory
environment that discourages smaller banks from lending to small businesses and
developing a track for women to become investors through government backed
programs like the Small Business Investment Companies. Lastly, Congress should require a
comprehensive review of the Small Business Innovation Research (SBIR) program,
which awards only 16% to women.
Even
though access to capital for women business owners requires changing cultural
biases and policies, all of us can start by educating those around us. If one of us stands up, everyone will stand.
