Geri Stengel

 
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Why

A troubling disparity

Research by Dow Jones VentureSource, Illuminate, Kauffman Foundations and the Small Business Administration finds that equity-financed women-led companies outperform all-male management teams. Yet, according to the State of Women-Owned Businesses Report by American Express, the percentage of women-owned businesses that break through the glass ceiling of $1 million in revenue is only one-third the rate of businesses led by men.

It’s no surprise that women raise runts. They are under nourishing their businesses.

For every nine men raising equity financing to start and scale their businesses, there’s only one woman, according to  High-Growth Women-Owned Businesses Access to Capital, a report by the National Women’s Business Council.

Access to capital is crucial to startup and growing companies. Undercapitalized companies have lower sales, lower profits, and generate fewer jobs.

 

Opportunity knocks, but women are slow to answer

Title II of the JOBS Act* created a new funding source with the potential to level the playing field for women entrepreneurs: equity financing for companies that are publicly raising money. One year after Title II was approved, though, it’s falling short on its promise. The percent of women raising money publicly is only 17% vs. 23% for those who are raising money the traditional angel investment way—privately, according to Crowdnetic and the Center for Venture Research respectively.

To date, no one has laid out the blueprint for women entrepreneurs seeking funding and angel investors who want a return on their investment so they can succeed, as well as guideposts for the crowdfunding community that wants to reach these women.

 

*On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law by President Barack Obama. The Act requires the SEC to write rules and issue studies on capital formation, disclosure and registration requirements.

Title II: On September 23, 2013, the SEC’s new rules went into effect lifting the ban on the mass marketing of private securities offerings, and providing parameters as to how an issuer might verify the status of accredited investors.

Title III: SEC is still developing the rules to allow a company to raise up to $1 million within a 12-month period from the general public (accredited and non-accredited investors) through a broker-dealer or “funding portal” website. 

 

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