At first glance, the statistics look encouraging: According to the National Association of Women Business Owners, there are 11.6 million companies owned by women, and they generate $1.8 trillion per year. Don’t get me wrong, we should celebrate the incredible number of women succeeding as entrepreneurs. But we all know that businesses need capital to grow. And that’s where the statistics aren’t so rosy. PitchBook data shows that women receive just 2% of venture funds for startups, and what’s more, just 25% of women business owners even seek funding, according to the Women’s Business Enterprise National Council.
What gives? Many studies have shown women to be more risk-averse, and often the deck is stacked against them when it comes to financing. It’s time to level the playing field and give women-led or -owned businesses every chance to succeed that their male counterparts have. There are so many women in the natural products industry—what should they consider when thinking about financing?
Women leaders are more risk-averse than men—this is evidenced in study after study. The positive side of caution can be beneficial. For instance, caution has put women leaders at the forefront of the COVID-19 crisis, where they have been appropriately risk-averse with human lives. But it does have its place in business, and you need to take risks to grow. Risk is defined as “exposure to danger,” and when articulated that way, it makes sense that leaders may shy away from financing. But we need to change the narrative for women and view it as an opportunity instead. Do your research, select the right partner, and make informed, intelligent business decisions to take on funding to allow for your success.
Seek out other women
It has been shown that female investors are more likely to invest in other women. It may be because women understand other women’s ideas better since they have shared experiences. For instance, many women who are also moms would immediately get Kat Nouri’s vision, when she created Stashers and revolutionized the sandwich bag industry by using her insights from making school lunch for her kids. Or it may be because they have an inherent desire to support and lift up other women. Whatever it is, seeking out women for funding may increase your chances of receiving the money you need and might prove to be a better partnership all around.
Look for alternatives
Venture capital can seem prestigious and validating, and it certainly has its place. But different types of financing may be as good, if not better, for your situation. For instance, if your goal is to sell at some point down the line, you’ll want to hold on to as much equity as you can now. Asset Based Lending, for example, lends you capital against your assets—like accounts receivable, e-commerce and even intellectual property. It’s debt that you need to pay back, but you’ll retain ownership of your business and have a bigger payday when you sell. Take organic baby food company Baby Gourmet, which Hero Group acquired. Co-founders Jennifer Carlson and Jill Vos took a combination of venture capital and asset-based lending funds but will be the first to tell you they wish they held on to more of their company.
The future is female. Let’s make sure the future of financing is female as well.