Female entrepreneurs and the funding gap

We caught up with Mike Timmins, Partner at EY for his insight into the topic of female entrepreneurs and the funding gap. 

"It’s positive to see more women than ever choosing to start up in business as a career option. However, with just one in every five businesses owned by women, and the gender pay gap in enterprise at 33%, (almost double the gender pay gap in employment) according to a think tank by Women’s Enterprise Scotland (WES), it’s important to examine the hurdles women face and how business can accelerate gender parity.

Many studies have shown that developing and supporting women's enterprise is important for overall business and economic prosperity. Research by Professor Sara Carter at Strathclyde University found that, if women started up in business at the same rate as men, the Scottish economy would benefit from an additional £7.6bn.

When examining why female entrepreneurs are not succeeding in the way they deserve, a lack of role models, education and encouragement at a young age are sometimes cited as underlying factors, in addition to unconscious bias. But from a practical perspective, business financing can also be a challenge.

Evidence suggests there is a funding gap. Research conducted in 2017 by the Scale Up Institute found that only 3.9% of venture capital funds in the UK go to businesses with a female founder. Similarly, research conducted last year by The Enterprise Network, found that while the amount raised by all-male founded companies was up 55%, the amount picked up by those with a female founder fell 0.1%.

A contributory factor is that companies involved in assisting female entrepreneurs are still predominantly male led. In short, we are talking about senior investors, key decision makers at banks, corporate lawyers, and angel investors. Often, if a female sits in front of a private equity house, or a bank, there is potentially an unconscious bias on the part of the decision maker. For some senior males, no matter what their intentions are, they have an engrained bias towards men. This personal view, is not intended to apportion blame, and of course many exceptions exist. 

It is important to stress that, to achieve equality, there doesn’t have to be positive discrimination. Rather, what businesses should look to strive for is diversity of thought. In other words, why would a business want eight senior decision makers asking the same ten questions? Businesses should want people who can ask the difficult questions as well as varied questions.

We are fortunate in Scotland that there are a number of bodies such as Entrepreneurial Scotland and WES, which provide a platform to galvanise organisations and individuals in looking for solutions to the challenges female entrepreneurs face. These bodies act as think tanks for what the business community can do differently to foster disruption in a traditionally male dominated field.

EY is working with Entrepreneurial Scotland and WES in Edinburgh, on Thursday, 7 February, to provide a masterclass aimed at female entrepreneurs.

The event will provide an environment for female entrepreneurs to understand the key factors for investment decisions from lenders or equity providers. The event is aimed at demystifying the decision-making process around funding organisations and will advise on pitching to these organisations.

It is also important to stress that male entrepreneurs can learn from women’s attitude towards securing finance. In my career I’ve found that women, on the whole, tend to be more aware of risk, and accordingly present a more realistic path for their venture.

At EY we are passionate about providing a platform for female entrepreneurs through EY’s ‘Entrepreneur Of The Year’ programme. The programme, run annually, identifies and celebrates the very best of Scotland’s entrepreneurial community, a community which is thriving. We proactively identify leading female entrepreneurs and encourage them to enter. EY also has a dedicated programme focusing on women - EY Entrepreneurial Winning Women™. The program identifies successful female entrepreneurs whose businesses show potential and provides them with support, resources and access to help.

By understanding the funding hurdles and potential pitfalls of obtaining business finance, we hope to help support our entrepreneurial community. Showcasing female talent and highlighting success stories will also hopefully inspire more women to start up their own businesses and in turn, benefit the Scottish economy."

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