Strategy

Women-Run Firms Face Capital-Raising Hurdles - Wilmington Trust

Jackie Bennion, Deputy Editor, 24 June 2020

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Usually, if there are great business owners with ideas, suppliers of capital would be expected to rush in, but with women-owned enterprises, there is a problem in cutting through, a large US wealth management firm has found.

Equity more than equality has become a dominant social theme of this pandemic, and a new report from Wilmington Trust highlights the challenges faced by women-run businesses. A lack of networking opportunities, access to capital and obtaining funding were top of the list of obstacles in a survey of women business owners conducted in February and March this year.

These difficulties aren’t confined to institutional access but rooted in family attitudes as well. The study of more than 1,000 business owners (with $5 million-plus in revenues) found that when family members are invited into the business, 65 per cent said it was a son joining and 43 per cent a daughter. Research from the wealth advisory firm also showed that women are twice as likely than men to say they lack networking opportunities to grow their business. Female founders are also less likely to close the funding they need than their male counterparts.

Yet figures suggest that female entrepreneurs are among the fastest growing segment for SMEs in many regions. In the US over the past 50 years, minority women-owned businesses, for example, have grown from roughly 4 per cent in the 1970s to over 40 per cent today.

The findings suggest that while in an efficient free market economy capital goes to those who achieve the highest returns, regardless of gender issues, in reality that may not happen fast enough. Family Wealth Report has examined women-backed venture capital firms trying to acclerate access to capital for entrepreneurs as one way to tackle the issue.

Last year Wilmington Trust's parent group M&T Bank created a new division to work with minority- and women-owned businesses recognizing the hurdles they face, not just in accessing capital, but winning government contracts and getting exposure to good networks.

Networks are much more than just capital, Doris Meister, head of Wealth Management, at Wilmington Trust said. “They can open doors to technology, industry knowledge, experienced peers, research, and financial planning,” she said.

In the report titled Wilmington Trust Business Owners Outlook: The Power of the Pack – released in conjunction with C200, a women’s executive leadership group – the firm surveyed business owners about their business and economic outlook, and perceptions about their own business performance.

Quality, not quantity
It is already well-documented in wealth management that the pandemic has broadly transformed the way businesses interact; it has pushed the need for transparency, authenticity, and frequent communication even further up the ranks, said C200's CEO Carolyn Dolezal. “For women business owners in particular, this means focusing on the quality of your connections versus the quantity," she said.

The survey also found that women are more cautious about tapping into their personal assets to support a business, with 31 per cent willing to do so versus 43 per cent for men. But it found that when women do invest in their own company, it is at a higher level than for men, especially for company founders (45 per cent versus 36 per cent).

On succession planning and bringing children into the business, although the survey found that more sons than daughters are likely to join a business (65 per cent versus 43 per cent as noted), it also found that female business owners are far more likely to involve their daughters (56 per cent) than their male equivalents (38 per cent.)

Marguerite Weese, national director of family legacy strategies at Wilmington Trust, said owners have not traditionally invested in developing their daughters or granddaughters into business leaders. “It requires educating them on business fundamentals and financial literacy from a young age, whether in the office or around the dinner table. Encouraging them to take leadership roles in other areas, so you are not suddenly handing them the keys one day,” she said.

But she says women are eager to get their daughters involved. “By identifying mentors, both inside and outside the family, owners can help the next generation of women build the leadership skills they need,” Weese said.

Sharon Vosmek CEO of the Silicon Valley-founded venture group Astia told this service in a recent call how over 20 years of being in the funding business, only around 2 per cent of venture capital has gone into companies with women in the leadership team.

“That’s been pretty constant,” she said. She launched her own investment entity in 2013, within the Astia Network and Astia Angel Fund, to support and fund women entrepreneurs, as well as address a “fairly broken” model in terms of financial inclusion for women.

It’s fairly basic, she said. “Venture capital relies on trusted networks, and due diligence of founders happens through a network of relationships; and these relationships still struggle to flow across gender. It’s not about venture in particular. But it’s more pointed with venture than with other means of capital investment,’ she said. Men and women are in separate business networks.

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