Female entrepreneurs have a vital role in shaping the economy and driving business forwards. But the question remains whether they have the same opportunities as men, or do they face extra challenges?
What’s certain is that female enterprise suffers from insufficient financial
investment. Today, female business setups only attract 2% of the venture capital
available in the UK. This funding discrepancy is reflected in the percentage of
businesses in Britain majority-owned by women just 15% compared with 30%
in the US.
So there are clearly issues that business advisers need to address if they are to help the next generation of female entrepreneurs get the funding strategy needed to fulfil their goals.
Take a risk
Evidence suggests women are more risk-averse than men, so can be more wary of certain types of capital investment. Advisers might want to be aware of commonly held attitudes to risk when helping a client devise an investment strategy.
That said, gender can be a bit of a red herring as the challenges of starting a business differ so much from case to case.
Preparing an entrepreneur for investment involves explaining the routes available. The traditional option of debt finance has the major benefit of allowing the entrepreneur to remain in the driving seat and keep full ownership. However, if the company’s track record is not strong, but its potential is high, an equity investor may be the answer.
Many business owners raise equity by bringing in relatives, friends, colleagues or even customers as well as looking towards business angels and venture capital.
Both debt and equity investment are sometimes unsuitable for small innovative businesses and some of the newer funding routes can offer more scope. These include mezzanine funds, matched funds and various forms of unsecured loans.
The business plan must tell investors everything they want to know about the company clearly and succinctly. An entrepreneur should be able to answer all of the questions that the investor is likely to ask in the business plan itself.
As female business owners are still in a significant minority in Britain there may be extra benefit in advising female entrepreneurs to talk to other women who have secured investment. Some of the regional funding organisations run support networks to make it easier to meet other women in business. Sharing experiences and knowledge with peers can strengthen confidence as well as help to find solutions.
One trend noticeable among female entrepreneurs is a tendency to play down ambitions and view their venture as more of a lifestyle business rather than a high-growth enterprise. This is by no means common to all female business owners, but having helped many entrepreneurs over the past few years, I have seen this often. Advisers may need to look at issues that may hold women back in the fight to win investment.
Reassuring investors
Entrepreneurs cannot guarantee the returns that an investment in the company will provide, but they can do a lot to reassure investors, and advisers can offer valuable guidance here.
Business angels and venture capitalists are focused on their return, and
approaching investors with a concept that does not demonstrate its potential
profitability will fail.
Entrepreneurs should be transparent about their capabilities and flag up areas
where they need assistance. Investors can usually offer professional input as
well as money. Constructive criticism is key to helping an entrepreneur succeed.
Make sure they are fully rehearsed and prepared for every eventuality.
The business world is complex and there are occasions when female entrepreneurs face extra challenges, yet the situation is rarely black and white. The average British female-owned business is under-funded and this problem can be addressed through awareness of the options and informed guidance. Investors, alternative funds and lenders are there to help and advisers have a clear role to play in supporting the development of women’s enterprise.
Accessing funding
• A strong management team is a great asset which should be highlighted when seeking investment. This needs to cover the three bases of innovation, financial management, and sales and marketing.
• Entrepreneurs must demonstrate a thorough understanding of their market, customers and competition. They must create workable plans and realistic goals.
• Remain positive and upbeat about the business, but never stretch the facts or make unrealistic projections.
• Advise your entrepreneurs on all the options available.
Sally Goodsell is CEO of Finance South East
