Terry Corbell, The Biz Coach
By Terry Corbell
Business Consultant

Why Women Receive Less Angel Funding Than Men



You’re a woman with a great business idea, but you’re short on funds. You’ve also heard that it’s tough for female entrepreneurs to get financing from an angel investor – someone who funds early-stage companies.

Ironically, female entrepreneurs receive less angel funding than men, even though they launch more businesses, according to a study co-authored by a finance professor, Dr. John Becker-Blease, at Washington State University, Vancouver.

The study is entitled: “Do women-owned businesses have equal access to angel capital?”

ID-10044310 ambroDr. Becker-Blease conducted the study with Dr. Jeffrey E. Sohl, who directs The Center for Venture Research at the University of New Hampshire, in 2007.

Dr. Becker-Blease formerly worked at the center prior to joining WSU where he researches entrepreneurship, corporate governance and women in business.

What is their study’s first insight on why women receive less angel capital? Fewer women than men actually apply for angel funds.

For those who do apply, Dr. Becker-Blease reminds us that investors aren’t interested in backing small retail-type micro-businesses.

“We found that women entrepreneurs submitted an average of nine percent of proposals received by our angel groups during the sample,” he said. “Indeed, of the proposals received, both women and men had an equal chance of receiving funding (about a 14 percent chance).”

Here is an excerpt of the interview with Dr. Becker-Blease:

Q: At what rates do women start business vs. men?

A: The rate of increase in the number of businesses in which women were at least 50 percent owners is quite a bit higher than the increase in men-owned-businesses. The National Foundation of Women Business Owners reports a 17 percent increase in the number of women-owned firms between 1997 and 2004, compared to an overall increase of only nine percent in the total number of firms.

Fewer women than men actually apply for angel funds.

Q: Why do fewer women seek capital than men?

A: Three possible answers. 1. Women entrepreneurs are not interested because the kinds of businesses they tend to start such as retail and service businesses are not the type that most angel investors care to fund. 2. Women entrepreneurs do not know who to ask or how to go about seeking capital. This is a by-product of their network composition. Most angel investors tend to be men (roughly 90 percent) and since women entrepreneurs are not typically part of their network, women do not know how to contact these angels. 3. There is discrimination, or perceived discrimination, in the angel capital market against women and therefore only those women with the best networks or those with the most promising business ventures will find it worth their time and effort to seek angel funding. I should note that we do not find evidence of discrimination.

Q: Why are women likely to seek funds from women angels?

A: It is not simple for the average entrepreneur to find an individual or group of individuals who are willing and able to provide two or three hundred thousand dollars worth of equity capital. Instead, angel investing appears to occur primarily within fairly closed networks.

Homophily is the tendency of individuals to interact with others who are similar to themselves, and sex-based homophily can be particularly strong. We do find strong evidence of homophily in the seeking of angel capital; men appear to seek funds from angel groups comprised disproportionately of men and women appear to seek funds from angel groups comprised disproportionately of women.

Q: How do women entrepreneurs fare compared to men in receiving funds?

A: The data suggest about the same. We have some evidence that angel groups that invest in a relatively high proportion of women-owned-businesses tend to invest more funds than other angel groups. This may be due to the kinds of businesses these groups fund, the stage of the investment, or just a quirk in the data.

Q: Why is so little known about women receiving private equity investors?

A: From the supply-side, since angel investors are not organized around a formal market, researchers have difficulty identifying them and even when we do, many angel investors are reluctant or have such heavy demands on their time that they cannot participate in academic studies. From the demand-side, identifying serious aspiring entrepreneurs, especially those in the kinds of industries that angel capitalists tend to invest in (that is, high growth) is perhaps even more challenging.

“… angel groups comprised disproportionately of men accept a higher proportion of women-sponsored proposals than do angel groups comprised disproportionately of women.”

Q: What other data did you uncover?

A: As an interesting aside, in a current project that Jeff and I are working on together, we find evidence that angel groups comprised disproportionately of men accept a higher proportion of women-sponsored proposals than do angel groups comprised disproportionately of women.

Q: What questions did your research leave unanswered?

A: We need to examine much more carefully the demand-side of the market. Why are there so few women entrepreneurs who seek funding? For a given level of quality of proposal, are men and women equally likely to receive funding?

Q: What advice would you offer women entrepreneurs seeking funds?

A: There is a growing awareness that women entrepreneurs may face added challenges in acquiring early-stage equity financing. This has led to the creation of women-focused angel groups such as The Women’s Investment Network in Portland, Oregon, which is part of the Oregon Entrepreneurs Network, www.oen.org, or the Seraph Capital Forum in Seattle, www.seraphcapital.com. Make use of their resources and any forums offered.

Well put.

From the Coach’s Corner, here’s more angel-funding advice from an expert who warns that many novice women entrepreneurs underestimate the marketplace:

“Tell women entrepreneurs they’ll encounter major competition,” said Neil Delisanti, who retired as a counselor with the Small Business Development Center in Tacoma, WA, and as a business professor at University of Puget Sound. “Advise them to assess their strengths and weaknesses to determine their competitive advantages, and to develop operating strategies.”

Mr. Delisanti said he’s observed some women are too empathetic to customers, but are more organized than men in financial and other administrative matters.

For information on raising capital in turbulent times, visit: What No One Tells You about Raising Investment Capital

“Being a CEO still means sitting across the table from big institutional investors and showing your leadership and having them believe in you.” 

-Christie Hefner


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of Ambro at www.freedigitalphotos.net

Seattle business consultant Terry Corbell provides high-performance management services and strategies.