Female entrepreneurs are being plagued by self-doubt when launching, funding, and scaling up their businesses, where the cause could be embedded gender bias in the business world.
Women-led businesses face an uphill struggle when it comes to fair access to capital, according to a new study by workplace specialists, Instant Offices. The study found that 35% of female founders experienced gender bias when raising funds for their businesses and received 5% less funding than men.
With men “still twice as likely to start their own businesses” and women accounting for “less than one-third of UK business founders,” the study highlights that UK entrepreneurialism remains overwhelmingly male.
Despite the statistics leveraged against them, women are carving out a name for themselves in a vein of business. That’s as micro-business founders (businesses that employ 9 staff or fewer).
According to Instant Offices figures, female business owners are most likely to run their business as a one-woman company. In terms of breakdown, it found that 37.70% of women entrepreneurs work alone, while 27.14% have 2-3 employees and 23.44% employ teams of 4 or more.
Despite men having better access to capital than women, another UK-wide study found that 32.37% of business founders were female in 2020, which is a sign of improvement considering it was 17% in 2016.
In terms of gender makeup by industry, female entrepreneurs are underrepresented in the construction services sector (5%), outdoor & garden services sector (5%), and the electronics & appliances sector (3%). while they continue to dominate the hair & beauty sector (76%) and the gifts & occasions sector (67%).
Not only do these statistics show that the gender of an entrepreneur continues to define the sector they enter, but it could also explain why women gain less access to funding capital than their male counterparts.
We know that male-led businesses are more likely to gain funding than female-led businesses, so funding bias among venture capital teams could mean they more often fund male-led businesses in ‘traditionally’ male sectors like construction where a female-led business offering the same service isn’t seen as attractive.
Aside from gaining initial funding for their business, female entrepreneurs also face issues when trying to scale their companies. The study found that 46% of female entrepreneurs “do not seek scale loans as they expect issues with the process,” while 40% don’t attempt to apply for one as “they expect to be turned down.”
To close the funding and scaling-up gap for female founders, the solutions are simple. Venture capital firms need to ensure they have a diverse decision-making board that includes women and ethnic minorities. When decisions are made on whether to fund a business or not, unconscious bias is diminished.
Creating funds that target female entrepreneurs and creating more women-centric business networks are also essential. However, psychological barriers faced by female entrepreneurs affect their chances of accessing capital, too, such as fear of being turned down for scale-up loans, and even when they’re starting their business in the first place where men are still more likely to try out an entrepreneurial life.
These barriers, such as self-doubt, may be self-inflicted. Still, they result from external factors such as funding bias and lack of female representation in the entrepreneurial world, which is why finance providers must work harder to remind women that they have the same chance of making a business a success, as men.