Women have shied from seeking outside funding to grow their companies, resulting in slower growth.
By Geri Stengel (Founder, Ventureneer)
Money is a key ingredient for high-growth, job-creating companies. Traditionally women have shied away from using outside funding. As a result, their businesses have grown slowly and created fewer jobs.
But that seems to be changing. For the last two years, angel investors have funded more women-owned businesses than ever before – more than 1,600 per year – which could mean that women-owned, high growth, job-creating companies are finally coming into their own.
Angels are wealthy individual that invest their money, their expertise or their connections in early-stage companies in exchange for a stake in the company.
Last year, fewer women sought angel financing than the previous year (12% vs 21% respectively), but a much high percentage of them actually received financing (20.5% vs 13%).
Jeffrey Sohl, director of Center for Venture Research, attributes this to the fact that women now have a better grasp on the kind of businesses that get funded: the industries, growth rates, and exit strategies (how investors will get their money back) that angels prefer. They’re also becoming better at pitching, as evidenced by the higher success rate for women-led businesses than for companies in general.
There’s another reason fewer women entrepreneurs have sought angel financing last year, according to Kay Koplovitz, chair of Springboard Enterprises, which educates and supports women-led, high-growth companies seeking equity capital.
“With lower costs of technology, many women entrepreneurs in digital media and e-commerce prefer to self-fund. Companies can start up with a minimal investment and wait longer until they need to seek outside funding,” said Koplovitz.
Koplovitz points out another important trend: the steady rise in the number of angels. More angel groups means angels can “crowdsource” their investments. That gives the angels more confidence in their investment choices; they can do much deeper due diligence with a group of people who have different expertise. “This improves the quality of the companies selected,” said Koplovitz.
With programs such as Springboard’s Equity Matters seminar training, women are learning about financing options and what lenders and investors look for. With organizations such as ASTIA, Golden Seeds and Pipeline Fellowship facilitating angel investments in women-owned companies, Sohl predicts that even more women entrepreneurs will go for angel financing … and get it.
This post was originally posted at the Forbes.
About the guest blogger: Geri Stengel is Founder of Ventureneer, providing knowledge and resources for values driven businesses. She is a Kauffman FastTrac GrowthVenture facilitator, former adjunct professor of entrepreneurship, and past board member of the NYC Chapter of the National Association of Business Women Owners, she understands the unique challenges women entrepreneurs face when growing their beyond $1 million. Follow She blogs regularly at Vistas. Follow her on Twitter at @ventureneer.