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Female founders continue to face unique challenges when seeking investments. The percentage of funds invested in female-led business in the UK dropped down from 15 in 2016 to 9 percent in 2017. Moreover, only 5.5% of all VC cash went into companies with a female founder.
1. VC firms
VC firms tend to be geared towards risk avoidance; they seek investments that ‘look’ safe. Venture capital firms being predominantly male, tend to invest in familiar social networks, which happen to be networks filled with men. Quick look at the statistics shows that women represent just 13% of decision makers in U.K. venture capital and a significant number of firms have no women representation at all. So due to the VC firms’ composition, they tend to fund individuals like themselves viewing them as more 'safe'.
Having looked at the statistic, a female founder might give up on ever receiving VC money and turn to banks for a loan. She might think it’s a safer solution. But the uphill battle does not stop here. Recent study by US based online loan aggregator Fundera found that “there is a consistent and systemic disparity in how men and women entrepreneurs can finance their small businesses. Women receive fewer, smaller loans for higher interest rates, and this doubtless contributes to their disproportionately small influence over the national economy.”
Another US online marketplace for small business funding, Biz2Credit, estimated that small business approval rates are 15%-20% lower for women-owned companies than they are for businesses owned by men. And yet again, female-led business are seen riskier, which results in lower credit scores and higher operating costs for women. Not the equality we are looking for.
On the pursuit of funding, female founder might turn to booming market of alternative financing. Crowdfunding platforms seem to be the place to go for women looking to finaly open the door of their businesses or expand their operations. PwC and The Crowdfunding Centre, having analysed over 450,000 seed crowdfunding campaigns, put together a report: Women Unbound: Unleashing female entrepreneurial potential. The report explores the experience of women raising finance through seed crowdfunding compared with more traditional finance raising routes.
PwC found that women outperform men in seed crowdfunding. Data shows that campaigns led by women were 32% more successful at reaching their funding target that those led by men. Even in the male dominated tech sector, where only 1 campaign in 10 is led by women, the female led campaigns turned out to be more successful.
In spite of the many successes, men raise substantially more finance and use seed crowdfunding more. Many female led business don’t reach their funding goals. This is because some of the female-led business are solving problems that men don't know exist, such as those related to motherhood or women’s health. Overwelming majority of investors on crowdfunding platforms are male, they fail to understand the financial opportunity and investment potential of businesses that solve problems they are unfamiliar with. Bottom line is that we are back to the diversity issue, there is not enough females investing money in startup business or even investing in general. Sadly, research shows women aren’t investing money anywhere. They are holding funds in cash and sometimes property but very few are investing in stocks and shares. Moreover, women are not being advised to invest by their financial advisers - who focus on investments with limited risk.
4. What's next
Turns out that women are not being advised to invest in startups, they are also not being told about the tax breaks. For instance, no one would advise women to invest in Facebook or Twitter if those two unicorns were just getting started. There is not enough women investors using the crowdfunding platforms as well as being part of the Angel market (only 14 per cent of angel investors are women). And here's where the mystery of female founding comes full circle.
More female investors will result in more female entrepreneurs to come forward to seek investment. Crowdfunding platforms, VC firms and Angel’s networks need more female investors who can spot the opportunity in startups created by women.
SHE Leads Company is a London based network of female entrepreneurs working to increase number of female led business and access to finance for women. If you want to support female led business get in touch email@example.com or visit https://www.sheleadscompany.com/workwithus
You decided that you want to start a business. You have this amazing business idea and you are ready to take the plunge! You have read a couple of encouraging blog posts on how easy it is to build a company and almost immediately start earning money. You are ready to GO!
However, before you jump in, let's take a step back and do some calculations. Starting a business is comparable with changing a career, for when you start a new career you require a new skill set. If you have money and no time you can hire consultants or a business coach and together develop fast track plan for your business. If you don't have the money, but you do have the time, your next move should focus on acquiring an entrepreneurial skill set to run your business successfully. From marketing, sales, PR skills to social media management and negotiating contracts with suppliers. First, you have to learn the skills then test it on your new businesses until it's successful. This can take months to implement and you need to be financially ready for it.
Starting my own business was the best decision I ever made and I am the last one to discourage you from proceeding in that direction, but making sure you have a solid financial cushion before you jump out of the 9 to 5 bandwagon should precede your decision.
Before quitting your job plan your escape budget that will cover the cost your retraining, enable you to take time off work to set up your company, while still being able to pay the bills. You can figure out how much money you are actually going to need by answering the following questions:
How much money do I need to actually start my business?
How much money I need to be happy?
How much do I need to cover every month?
What expenses are nonnegotiable: mortgage, savings, health, utilities, taxes, and business expenses?
What expenses can I sacrifice: eating out, mani-pedi, hairdresser, holidays, etc.
Once you know your numbers you can consider one the 3 options to transition from job to business.
1. SIDE HUSTLE aka MOONLIGHTING
In this scenario you either keep your current job or go part-time and build your business on the side. This is a great option if you are looking to start a lifestyle business or build a startup. It is the most time-consuming option and will require commitment to your business and change of lifestyle. You may have to say good-bye to weekend trips and nights out with friends, as you will have to put all your time and energy into this new business alongside your current job. It's not for the faint-hearted and for those who give up easily. However, it is a great way to test out your ideas and learn more about your new market without compromising your financial security. The goal in this approach is to start earning money from your new venture while you are still in your day job and only quit once your side hustle starts bringing in circa 75% of your current salary. Alternatively you can continue with your job and the side hustle until you reach the level that makes you happy.
If you are not desperate to get out of your job as soon as possible this is a great option to be considered. It reduces your financial risk and gives you time to experiment with your new business without having to worry about the money. Assuming you already put together a clear financial budget, listed how much money you are going to need and how much are you spending per month, you can start regularly setting aside a sum of money that will bring you closer to realizing your escape plan. And by that I don’t mean you have to now transform into cold-hearted Ebenezer Scrooge McDuck to start a business. Focus on responsible financial planning and on the first day of every month set aside a sum of money that you can afford. You can then track your progress and measure how far you have left to go. In my experience, you want to save a 9-12 months worth of living, food and business expenses before you take the plunge and quit your job.
3. JUST DO IT
If you already left your job or can’t take it any longer and are willing to take financial risk the JUST DO IT method is for you. This requires a fairly major lifestyle change to make it work. Some people go back to live with their parents, sell possessions or simply change their spending habits and manage their money more effectively. Others move to countries like Thailand or Vietnam where the cost of living is low.This approach offers a lot of freedom, as you can combine it with part-time job or with savings. Bottom line is that you will need to find a source of regular income until you set your business up and you start earning full-time job revenue.
Which option is best for you?
You know you want to start a business and become rich but you have no idea what type of business it should be. The first thing that comes to mind is – “I am going to build a startup”. But building a startup is not the only option for entrepreneurially spirited people. In most cases startups will require coming up with an unique idea, trying to chase funding and spending a couple of years making it happen. No doubt it is an exciting route but a risky one as well. For every startup that makes millions there is hundreds that fail. And even if your business is successful you still might end up with no money at the end, read a Financial Samurai story here.
If you are an aspiring entrepreneur you have a lot of other options to choose from when it comes to starting a business. You can go into retail and sell books, motorcycle parts, sporting goods, vitamins, coffee, you name it or you can enter the food industry or start a manufacturing business. Bottom line is that eventually in most cases all of those businesses will turn into a 9 to 5 job after the initial excitement wears off.
The truth is that most of you don’t want to spend the next 5-10 years building a global empire. You want a business that will support your lifestyle while giving you enough of free time to do the things that you really want to do, like travel the world or work from a beach while sipping on mimosas. You want a lifestyle business that promotes the lifestyle you want to have.
The key point of lifestyle business is enjoyment and a harmonious balance of work and life. Does that sound appealing? It does to many. That is why lifestyle businesses are booming. Here are the main reasons why:
They are the opposite of startups. Startup business is set up with an intention to maximize the profit in a shot period of time. Its owners continually seek funding to enable growth and expansion. Lifestyle business does not go out seeking to attract venture backing. It is funded by the owners and focused on generating revenue from its clients. The benefit is that the founder of a lifestyle business is only responsible to herself. There is no pressure from the investors of making it big.
You can choose where and when to work. No 9 to 5 or 9 to 9 work schedule, unless you want it. Flexibility is the key benefit of a lifestyle business and it is what most of you really crave. As a lifestyle entrepreneur, you truly have the flexibility to set your own schedule.
You set the deadlines and you are in charge. You set up the business and you are not bound by any obligations to deliver certain amount of work at strict deadlines.
You decide how much income is enough for you
Positive cash flow early on - you don’t have to wait years to generate profit. You can start a lifestyle business with less than £500 and become profitable after first couple of sales. And a bonus: you can further minimize your business costs by running it form abroad, where it’s cheaper to live. How does moving to Thailand for a year sound?
What are the best lifestyle businesses to start?
There are thousands of business models out there to choose from. To narrow it down I divided lifestyle business into 3 categories:
Selling digital products
Start creating content through a medium that can be used to generate a relationship with a target audience. You can then monetize that content with ads or by letting people know about your own products. You can start a blog , podcast or youtube channel to build your community then you can create an online course with Teachable or Udemy or writhe an ebook and monetize it.
Selling physical products
There is a huge market for product-focused online lifestyle stores that focus on customized offers for its customers. Selling physical products online is a simple business model that is also easy to set up on platforms such as eBay, Etsy or Amazon
Freelancing and Consulting
There are unlimited possibilities for freelancers and consultants out there, from web developers through novelists, poets, journalists to consultants and advisors in finance, law, technology, health, travel, real estate, and more. For everyone with the right experience this can be a route to start making money rather quickly. You can start by by registering to People Per Hour platform.
Start a lifestyle business with SHE Leads Company today. Subscribe to our newsletter and stay up to date with new business ideas.
Last week (2017) saw the annual WebSummit conference take place in Lisbon, Portugal. WebSummit is described as ‘where the tech world meets’ and attracts a huge number of attendees (60,000+ of which 68% are senior managers, according to their website). Two things particularly interest me about WebSummit: the focus on startups and innovation, and its attempts to increase gender diversity.
WebSummit includes a vast number of startups who are exhibiting and pitching their ideas, as well as talks from more established companies and individuals. A cursory glance at the technology / business ideas being discussed includes everything from co-working space, blockchain, digital marketing, SAAS, smart home systems, the sharing economy and of course lots of AI. There are a number of presentations, panel discussions and workshops but the real USP lies in networking - talking to people from all over the world about the ideas they are working on, making connections with other professionals, investors, mentors or potential collaborators.
For the last two years, WebSummit has offered free or heavily discounted tickets to women in tech (a broad definition). Tech companies are still struggling with diversity, both in terms of attracting candidates and creating cultures that allow everyone equal opportunity to progress. Latest figures suggest that in the best cases women account for 30% of leadership or technical roles, and often far lower percentages are reported. So it stands to reason that tech conferences would suffer the same problem without such initatives as WebSummit have introduced. If it seems controversial to offer women cheaper tickets, consider that on average women still earn less than men for the same work. Women are also less likely to be entrepreneurs overall, though there are signs that this is changing. Giving women easier access to the networking and learning opportunities afforded by conferences like WebSummit can only be a step in the right direction towards increasing diversity.
Outside of the main conference event, social media gives the potential for anyone to set up their own related group, make connections and arrange meetings. It was through a WebSummit Facebook group that I heard about a UX meetup, which attracted UXers from Malaysia, The Netherlands, Germany, Portugal and the UK working in agencies, large corporates, startups and the public sector. A pretty diverse mix that made for interesting conversations! Also of great value was a mentoring session offered as part of the women in tech initative. The sheer amount of people and topics at WebSummit is overwhelming so you have to find ways to navigate and seek out what’s of interest to you. And I’m pleased more of us are having the opportunity.
Read more about the content of WebSummit 2018 here.
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