By Martha Salinas, chief customer officer, MSTS
Let’s hear it for the girls: The number of female-run businesses is up 21%. In the fight for gender equality, this steady climb is welcome news. But when you focus on gender-based discrepancies within the venture capital space, there’s still plenty of work to do. Currently, less than 3% of venture capital investment funds female-fronted companies.
Women in business are struggling to secure capital and it’s time for a change.
The age-old dynamics of the boys’ club and the future of venture capital
There are countless reasons why someone — regardless of their gender, race and economic background — might struggle to obtain funding. But for women especially, the well-established dynamics within the venture capital space are a formidable obstacle. Female entrepreneurs must glean a better understanding of these dynamics in order to find more success in the space.
- Conservative Projections — Women presenting to venture capital firms tend to conservatively project their business’s goals, budgets and revenue. Men, however, are more likely to present numbers that are exciting and big-picture, which often translates to more funding. Women must do better when it comes to thinking big picture while presenting their business. This isn’t a green light to exaggerate or inflate numbers, it simply means women should steer clear of overly conservative or safe estimates.
- Trusting Your Tribe — Human beings are inherently inclined to trust people that are similar to them, whether that’s based on nationality, alma mater or gender. With only a small fraction of U.S. venture capital firms boasting at least one female partner, it’s no surprise that male-majority venture capitalists are more likely to trust and invest in people that are like them, i.e. men. This isn’t necessarily done on purpose, but it does put women-founded businesses at a disadvantage — until more women are at the helm of these firms.
What can be done to change gender-biased dynamics?
Luckily, the number of female investors is increasing, which will have an impact on the future of venture capital. This in itself will help tremendously with the above dynamics, especially as more investment groups are created with the sole purpose to invest in women-owned or women-led businesses.
That being said, a 100% women-only venture capital space is not the solution. Diverse executive teams are proven to make better decisions and gender-diverse companies are 21% more likely to outperform a company with exclusively male executives. This also indicates that more funding at the onset of a business doesn’t always guarantee future success — something our female entrepreneurs should keep in mind when trying to keep up with their male counterparts.
Final advice: Take the risk
I’m a member of Women’s Capital Connection, an angel investing group with a focus on women-owned businesses. Unfortunately, we don’t have near enough women-led businesses coming to us for funding. To boost these numbers, we must find ways to encourage and inspire women to take the leap, either by starting businesses of their own or expanding their current business to a new level.
Fewer women start businesses than men, but those women that do often have substantial and impressive educational and professional backgrounds. While many men also have impressive backgrounds, in general, male entrepreneurs are more comfortable taking risks and starting a business with little experience and less impressive qualifications — and women should too.
To combat this, women should find mentors and reach out to inclusive investment groups when faced with a challenge or uncertainty. Tap into those investor resources so you don’t have to say no to expansion and growth. There is likely someone in the portfolio group that has experience navigating similar problems, such as finding alternative forms of funding or ways to minimize cash flow issues.
Capital is the key to scaling businesses. Leveraging alternative payment and credit options can give women-run small businesses a leg up on the competition by shouldering the financial risk. These solutions can enable small businesses to offer their customers Net30 terms, exclusive lines of credit and managed collections to create a healthy cash flow and level the playing field with larger suppliers. Secured capital and extra time mean greater opportunity to focus efforts on the future of the business.
Many women worry about entering the world of entrepreneurship because they have little to no experience or knowledge in the business world, which men don’t worry about to the same extent. As both investors and business leaders, women must have more confidence in their innate abilities and instincts. And in doing so, start tackling gender-based disparity one investment at a time.
Martha Salinas is the Chief Customer Officer at MSTS, a global FinTech company in the B2B payment space, based in Kansas City with operations around the world. She is also an Angel Investor and a member of both Mid-America Angel Investors and the Women’s Capital Connection, a network of accredited angel investors dedicated to identifying and funding the most promising start-up business opportunities in the Kansas City region for MAA and women-owned for WCC. She is also a business mentor with the Techstars organization and sits on the advisory board of Kenzen, a San Francisco-based company that is pioneering the next generation of personal health monitors and analytics designed to empower its users in the field of health, motion tracking and performance. She holds a bachelors in Economics and International Business from St. Louis University and a masters in Economics from the University of Missouri – St. Louis.