Last Wednesday, I sat in on a webinar called “A Rising Tide – Financing Strategies for Women Owned Firms” led by Dr. Susan Coleman, Professor of Finance at University of Hartford. The event was hosted by two organizations that are working hard to even the financial playing field for women business owners: Women Impacting Public Policy (WIPP) and Women Accessing Capital. As a woman in the small business financing industry, I was drawn to this topic. While I knew of a couple government sponsored programs, I didn’t know much about private financing options specifically targeted for women business owners. I did a little research before the session and when I learned that only 11% of companies that received venture backing in 2009 had a female CEO or founder, I was eager to find out why.
Dr. Coleman spent most of the webinar discussing the female entrepreneurs she interviewed when writing the book. Many of them had incredible and inspirational stories (not to mention some really inventive business models). When Dr. Coleman delved into the struggles they faced financing their new endeavors, the statistics looked bleak. According to the Kauffman Institute, women entrepreneurs typically start their businesses with a larger percentage of debt (than men) and virtually no outside equity. Women are also more likely to mismanage the three most important working capital accounts than their male counterparts: cash, accounts receivable, and inventory. Without working capital, a business is guaranteed to fail.
When I left the session, I felt like I had more questions than answers. Dr. Coleman discussed a few financing options for women including bank loans, industry specific grants, and programs through the SBA, but I felt there had to be more. I was right. Financing for women is a hot topic and a fast growing industry. There are hundreds of organizations out there that ONLY invest in women business owners. Here are just a few (sorted by type):
Angel Investors and Venture Capital Funds
I’m categorizing Angels and VCs together for the purpose of this article. Though they are very different in a few key ways, both groups are investing money in exchange for an equity stake in the business. Angels are typically wealthy individuals (or groups of individuals) who make investment decisions faster, take greater risks, and invest less than their VC cousins. VCs are usually well run corporate machines with a board of their own, millions of dollars to invest, and far more specific financial and growth goals that must be met. There are currently more Angels than Venture Capital funds investing in women owned businesses. Here are a few examples of Angel networks and VCs that specialize in women-owned businesses:
- Astia is a non-profit Angel fund and network. Astia's mission is to provide access to the networks and expertise that women high-growth entrepreneurs need to succeed, and ultimately to impact today's global economy.
- Women Innovate Mobile (WIM) is a three-month mentorship driven accelerator program. Selected companies receive $18,000 in funding, free office space, product development and design support, mobile-marketing promotions, and access to an incredible network of mentors, funders and advisors. In exchange for their investment and services, they receive a 6% equity stake in each company.
- Golden Seeds is “an investment firm that pursues above market returns through the empowerment of women entrepreneurs and the people who invest in them.”
- Forerunner Ventures is an investment firm specializing in digital commerce. While they fund both men and women owned firms, the VC itself is founded and operated by women.
For additional information, I encourage you to read this article on the Pipeline Fellowship, an organization dedicated to bringing more women philanthropists into the world of Angel investing. And this article on some VC-backed women’s success stories.
Crowdfunding is currently a hot topic in the small business financing world. Right now, websites like Kickstarter are helping startups raise money through donations from the general public. If the JOBS act passes through Congress in 2013 (and it’s predicted it will), crowdfunding will look a lot more like Angel investing with individuals giving money in exchange for equity. Platforms like CircleUp are staying ahead of the trend by partnering seasoned Angel investors with entrepreneurs on an easy to navigate platform. Crowdfunding is typically a more transactional relationship without the mentoring and education that most Angel networks provide. CircleUp founder and COO Rory Eakin says that “since launching in April 2012, over 60% of the businesses funded on CircleUp have had a woman CEO – nearly five times the VC industry average. All of our investments have women Angels involved, also at higher rates than they have participated historically.” SoMoLend is doing something similar but focusing on connecting entrepreneurs with investors in their own neighborhoods.
Accelerator networks are groups of seasoned entrepreneurs, industry professionals, and investors who work together to train and prepare the next generation of entrepreneurs for success. Through both training and financial networking opportunities, these groups increase an entrepreneur’s chance of success exponentially – even if they aren’t financially investing directly. A few Accelerator networks that work only with women business owners are:
This is just the tip of the iceberg! The number of financing opportunities for women entrepreneurs is growing every day. Not a startup? Not a problem. There are many alternative financing options out there for small businesses looking to grow. Invoice financing, invoice factoring, and asset-based lending are just a few non-bank options. Take some to research financing options and I guarantee you’ll be amazed at the opportunities you find. I know I was.