It is well known that companies with diverse senior leadership teams outperform their peers across key metrics, including profitability, revenue generation and efficiency.
For example, a study by the Boston Consulting Group found that companies with more diverse management teams achieved 19% higher revenues on average just by having greater female input. Such research has contributed to the rise of women in business leadership positions.
Yet, female-led businesses still struggle to secure funding; and was a clear theme at our recent Ambition Nation: Female Leaders Series event. However, once past the venture stage, research shows a sizeable proportion of fast-growing companies are majority female-led and make a strong economic contribution. Levelling the funding playing field could not only help diversity across the business but also contribute to higher GDP.
One female-led business doing more
That society has recognised the need for greater female representation in business leadership positions is to be applauded. Women now hold, thanks to initiatives such as the 30% Club, 29% of FTSE 100 board positions and only five companies in the FTSE 350 Index now have all-male boards – compared with 152 companies (over 40%) in 2011. However, progress in this area has not resulted in similar strides being made in improving the accessibility of funding for female-led businesses.
In fact, a recent global study by EY found 20% of female-led businesses have no plans to raise capital, compared with just 3% of male-led firms.
That so many female entrepreneurs and founders still struggle to secure the funding they need to scale-up their businesses is a key reason why finnCap continues to hold increasingly popular Female Leaders Series events. We support and foster our most ambitious female founders to create a better business future for Britain. This ethos is at the heart of everything we do.
Positive new steps
The recent Treasury-commissioned Alison Rose Review published earlier this year, showed the UK economy could add £250 billion to annual GDP if women were empowered to start and scale businesses at the same rate as men. It also found that a barrier to obtaining finance is that fewer women than men personally know an entrepreneur.
Lacking personal connections limits access to contacts and funding leads. It makes it even more critical that women are aware of all the funding options available to them, though that appears to be at least partly dependent on making the right connections.
Greater efforts are being made by female entrepreneurs to organise better networking opportunities, and there are a growing number of VC funds that are being headed up by women that target female founders specifically.
However, there is still much work to do before women can say they have parity with their male counterparts in the business world. Some positive steps are being taken. The Government has set a target to have 600,000 more female entrepreneurs by 2030 and there are measures being taken to create new investment vehicles to increase funding to female-founded businesses. Also, financial institutions will be encouraged to sign up to a new code under development by HM Treasury to support investing in women.
>See also: The rise of Gender-Smart Investing
Female entrepreneurs need to sell their vision
When I moved from heading a company division to founding and becoming the chief executive of a business, I appreciated the risks I was taking and the different order of commitment and responsibly this would involve. But I also believed in my vision and had a passion to carry it through.
Staying committed to her vision was how Henrietta Morrison, founder of the pet food brand Lily’s Kitchen, who spoke at finnCap’s recent Ambition Nation Female Leaders Series, was able to break into a market dominated by huge multinational companies. Armed with an innovative and ethical approach, and the confidence to sell her vision, her company has been able to choose from numerous funding offers – enabling it to grow, upgrade its systems, and expand internationally.
It’s no secret that funding providers respond most favourably to ambitious founders who can sell their vision. Unfortunately, a recent study published in the Harvard Business Review found that VC investors often treat men and women differently. The study found men were asked more ‘promotion’ questions about the upside of their proposed venture while women tended to be asked ‘prevention’ questions about risk mitigation.
Men, therefore, were encouraged to promote their business idea, while women were, by and large, made to feel they had to defend their business idea. But the study also found that female entrepreneurs who flipped the line of questioning away from risk mitigation and pushed the positive case for their business venture and its funding requirements received substantially better offers than their male counterparts.
Debt, or losing equity equally should not be feared
There are advantages to both debt financing and equity financing – about both of which female entrepreneurs can often feel a sense of unease given some of the inherent risks involved with these funding routes. Yet with a well-thought-out plan for growth, debt financing enables business founders to maintain ownership of their business and retain profits. There are also the tax advantages to consider: interest payments on debt finance, for instance, are tax deductible.
Equally, all entrepreneurs are reluctant to give away equity in their business because it can mean a loss of control. But with the right investors, equity funding is not only a way to raise capital without taking on new debt – it’s an opportunity to bring significant expertise, experience and relationships to the business that will help it reach the next phase in its growth.
One key factor that can put off female entrepreneurs from both routes is the level of financial jargon involved. I was fortunate I had my training as an accountant so I was financially literate but many there are many other female entrepreneurs who have not had such training so I would encourage growth business groups and professional service bodies to collaborate and help address this issue.
A strong network and supportive mentors help
Networking helps female entrepreneurs find others who might be able to share their own experience and mentors who may be able to guide them or help them make even greater connections in the business world. In fact, one of the first actions I undertook after founding finnCap was to identify successful individuals who I believed could mentor me and I greatly benefited from their advice and support.
At finnCap’s recent Ambition Nation Female Leaders Series, Lesley Gregory, chairman of Memery Crystal, said “A mentor will challenge you to ask the right questions, set boundaries and can increase the pace of your personal and professional development. They are there to get the very best out of you”.
Many founders have discovered that seeking out the right mentor is among the most valuable and rewarding steps you can take. But in the UK only 28% of women in the workplace say they have ever had a mentor now or in the past compared with a third of men. Men also report having had more mentors than women – 3.7 on average compared to 2.5 for women.
While much progress has been made, there is still more work to be done to help deliver the equality of fundraising opportunities that will help ensure female entrepreneurs have as much chance of business success as their male counterparts.