Challenges for Women on the Path to Business Success – Financing

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The previous article outlined the general difficulties that women face when pursuing their professional careers in the business environment. Three main obstacles were defined: challenging project funding, issues with accessing training materials and substantive support, as well as the impact of negative stereotypes and discrimination. Today’s post will delve into the first of these challenges – financing.

One of the most crucial steps towards launching a career is securing appropriate initial capital. There are several ways to achieve this goal, such as collaborating with external investors, utilizing government programs, or seeking loans and grants from banks. Unfortunately, women often encounter unexpected obstacles in their attempts to acquire such funds. The issue of women’s business funding is complex, arising from multiple factors and requiring comprehensive actions to improve the current situation. Some causes and potential solutions to these issues will be presented below.

Key challenges

Despite the apparent openness of the investor market to new experiences and promising innovative projects, female entrepreneurs often encounter a lack of favor, trust, and belief in their potential. Bonnie Carter, CEO of Full Circle Insights, addressed this issue, stating that investors are more inclined to support individuals within their own industry and vicinity rather than assisting women looking to embark on an independent professional path. The scale of this problem is evidenced by research conducted by Babson College, revealing that only 3% of start-ups financed by venture capital have female CEOs.

Another obstacle for women in acquiring funding is the ingrained habits and established patterns that guide investors. The majority of this group consists of men who frequently interact with male entrepreneurs. While projecting potential profits for a new company, men often inflate their estimates, which unfortunately do not reflect in the final financial  results.  However,   women,  being  more  conservative  and  cautious  in  these

predictions, provide more modest figures closer to likely actual outcomes. The consequence of these investor habits is a tendency to underestimate projected results, impacting women and their projects that are erroneously deemed unprofitable.

The example above is just one of many systemic habits negatively affecting women’s efforts. Substantial differences in the treatment of entrepreneurs of different genders can be observed during presentations of business ideas to investors. Dana Kanze, a researcher, analyzed  the  course  of  such  meetings,  diving  into  the  content  of  question-and-answer sessions between investors and entrepreneurs. The results of her research clearly defined the attitudes towards the female and male segments of the latter group. Questions posed to business owners during presentations can be divided into two categories – promotion (gains, hopes, achievements, development needs) and prevention (minimization of losses, responsibility, security). As Kanze discovered, a significant 67% of questions directed at men were promotional, while 66% of questions directed at women were preventive. This disparity not only indicates unfair perception of women but also largely accounts for the amount of ultimately acquired funds.

Remedy

The  issues  of  gender  inequality  and  unjust  treatment  of  women  entrepreneurs discussed above have been known for many years. While more attention is being devoted to them over time, a long road remains ahead of us towards an environment free from biases and the influence of the past. However, change is possible, requiring only the recognition of the issue  by  key decision-makers and the desire to create a truly friendly system, free from favoritism and prejudices.

One such solution is to examine existing funding models, identify their pathologies, and either deeply restructure them or create entirely new systems that offer women the same privileges and facilitations as men. Another positive step is diversifying the investor landscape, allowing women to occupy key positions in this group. This would lead to open and fuller communication and exchange of views between investors, ultimately recognizing the full potential of projects proposed by women and providing them with a safe and comfortable environment to present their solutions.

A specific method for temporarily dealing with the current situation is proposed by the aforementioned researcher Dana Kanze. She notes that during business presentations, despite receiving preventive questions from investors, it is beneficial to maintain responses in a  promotional atmosphere. According to her research, this approach resulted in receiving funding fourteen times greater than when responding in a manner dictated by investors.

Finally, despite hurdles thrown in the path of women by individuals in the venture capital environment, they have alternative funding means at their disposal. While perhaps not as attractive, bank loans and grants awarded by relevant national and international institutions remain an option worth considering.

 

Sources:

  1. Adam Uzialko, Challenges Faced by Women Entrepreneurs and Some of the Most

Successful Women to Follow, Businessnewsdaily.com

 https://www.businessnewsdaily.com/5268-women-entrepreneur-challenges.html

  1. Michael Chmura, Entrepreneurial Women Need Disruptive Financial Models, Babson Thought and Action,

 https://entrepreneurship.babson.edu/diana-international-impact-report/

  1. Flexiloans.com, Common Issues Faced by Women in Funding a Business,

 https://flexiloans.com/blog/issues-faced-by-women-in-funding-a-business/#1_Financi

 al_Problems

  1. Dana Kanze, The real reason female entrepreneurs get less funding, TED.com

 https://www.ted.com/talks/dana_kanze_the_real_reason_female_entrepreneurs_get_le

 ss_funding/transcript

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