How to Get Funding for Your Business as a Women Entrepreneur
In South Africa, the median gender pay gap is between 23% and 35%. As a result, women-run households (which is approx. 38% of households in S.A.) are 40% poorer than those run by men according to the Borgen Project.
With the recent pandemic, the gender pay gap is widening – the National Business Initiative (2021) reveals that women earn R72. 44 for every R100 that a man earns. It’s therefore no surprise that more women are turning to entrepreneurship, with the Mastercard Women Index of Women Entrepreneurship (MIWE), reporting a significant increase in “female necessity-driven entrepreneurship” – from 62.8% to 91.2% over 2020/21.
While the South African government has prioritised the advancement of women-owned businesses, there is still a long way to go when it comes to funding and supporting them.
‘It’s a well-known phenomenon that women struggle more to get funding than men, who are perceived to make better entrepreneurs,’ says Donna Rachelson, Director of Seed Academy. This is confirmed by Forbes.com, which states that female entrepreneurs receive less than 3% of all venture capital funding – and by Fortune.com which declares that the funding gender gap is getting worse.
In part, this may be owing to the reality that very few women are actually at the helm of start-ups but mostly, research suggests that women tend to be judged on their performance while men get rated on their potential. Men are believed to be able to create more influential networks, hold higher-ranking positions and as we already know, command more money, which is intrinsically linked to a higher value.’ Women end up asking for – and receiving – less.
Venture capitalists tend to be mostly male for the same reasons and unfortunately, those with money to invest, pick projects that they can relate to and are most passionate about. Rachelson does add though, that ‘the good news is funders just want to make money at the end of the day and if women can break through cultural limitations and tangibly demonstrate their worth, they may just sit up and realise that discrimination only gets in the way of opportunity.’
Rachelson suggests that women take this into their own hands by primarily focusing on business traction, adding that ‘an increasing number of orders coming in will peak investor interest.’ She also adds that ‘demonstrating that their business is bigger than one person, with a powerful team behind it that can support its growth, is equally as vital. ‘Of course, also key to showing growth is knowing what the key financial drivers of their business are and being comfortable talking about them – many women fall down here,’ she adds.
A focused and impactful approach to marketing will go a long way too, as will a crystal-clear understanding of target markets and key business differentiators. Rachelson does point out though that ‘it’s not always possible to wait until everything is perfect before looking for funding. Women tend to be perfectionists and need to practice confidence, which goes a long way toward ‘faking it until you make it.’
Further to the advice she has for women entrepreneurs, Rachelson emphasizes that venture capitalists need to step up their game too. ‘Financiers need to be thinking about what they can do to increase the diversity of their portfolios. Blind funding practices where the gender of an applicant is not disclosed, unanimous partner voting and women actively stepping forward to support other women, are just a few ways in which this could realistically be achieved.
While more research is certainly needed to fully understand the influence of gender on funding and what factors determine a female entrepreneur’s financial success, we need to take action now if we want to significantly close the gender pay gap.
Seed Academy has relentlessly and passionately championed the growth and development of women and youth entrepreneurs, driven by the belief that entrepreneurs create economic growth, uplift communities, and create a more equitable future for all. Read more about our AccelerateHer, AccelerateYouth, and Enterprise Supplier Development Programme (ESD) on our website or contact us for more information.