The Milken Institute and the George Washington University recently hosted a panel discussion at GWU's Jack Morton Auditorium about the unique barriers women entrepreneurs face in gaining access to capital – along with innovative market and policy solutions that may help. Moderated by best-selling author and Forbes contributor Samantha Ettus, the distinguished panel included Lisa Hall, president and CEO of Calvert Foundation; Kenneth Hostetter, senior vice president business banking manager at Wells Fargo Bank; the Honorable Karen Mills, administrator of the U.S. Small Business Administration; Peggy Wallace, managing partner of Golden Seeds; and Melinda Wittstock, CEO and founder of NewsiT.
Below are some noteworthy takeaways from the discussion:
• Improving Capital Access. The panelists agreed that despite increases in the proportion of female-owned firms in the United States, now standing at 30 percent, more work must be done to reduce or eliminate obstacles that prevent female entrepreneurs from securing the capital needed to start or grow their businesses. Administrator Mills expressed the SBA's support for new legislation that would not only offer special funding set-asides for female entrepreneurs, but also enhance the agency's ability to provide required capital. Ms. Wallace added that bringing more women into management roles within angel and venture capital networks would improve female entrepreneurial access to those networks, which continue to be heavily dominated by men.
• Creative Approaches to Satisfying Demand. The panelists also agreed that there is not necessarily a one-size-fits-all solution to increasing capital access for female entrepreneurs. For example, Ms. Wittstock underscored the importance of women-led financial networks in helping remove obstacles women entrepreneurs encounter because they may not fit the age and experience profile venture capital firms typically expect. Ms. Hall added that female entrepreneurs have varying capital needs depending on the type of small businesses they start and the growth objectives they have in mind. She highlighted the importance of financing from local Community Development Financial Institutions (CDFI). Also important is the role of microfinance, which, according to the AEO 1 in 3 Initiative, has the potential to promote growth and job creation by satisfying the capital needs of America's microenterprises.
For other women-owned businesses seeking capital from traditional banks, Mr. Hostetter noted that Wells Fargo has lent approximately $45 billion to women-owned businesses since 1995 and continues to work to increase womens' access to commercial lending.
• The Role of the SBA. Administrator Mills explained that the SBA mission includes engaging with groups that have historically experienced barriers to capital access. The Administrator noted that the SBA is three to five times more likely to make loans to female- and minority-owned businesses because of apparent market failures in satisfying their capital demands. Additionally, Administrator Mills advised female entrepreneurs that that they will be most successful in securing SBA-guaranteed loans if they are able to present a business plan demonstrating existing cash flow and suitable collateral. If unable to present such a "bankable" plan, women have the opportunity to receive mentorship and guidance at any one of the SBA's nearly 100 Women's Business Centers around the country. Administrator Mills noted that from the government’s perspective, it is good business to invest in the potential of women- and minority-owned businesses because of comparatively low default rates for these groups.
• The Value of Diversity. The panelists discussed gender inequality in investment firms and the importance of diversified teams. Ms. Wallace stated that women represented roughly one percent of the angel investment industry prior to the formation of Golden Seed. Though this proportion has increased to 12 percent, the gender disparity among angel investors and venture capitalists, 97 percent of whom are male, remains striking. To emphasize the importance of diversity and female inclusion in management teams, Ms. Wallace cited a recent study revealing a positive correlation between the number of women in a given group and the measured collective intelligence of that group.
Source: Harvard Business Review
• Professional and Educational Guidance. The panelists concluded the discussion by emphasizing the importance of mentorship and education in promoting female-owned businesses. Administrator Mills highlighted the mentorship resources offered by SBA, and encouraged budding entrepreneurs to study accounting. Similarly, Ms. Wallace suggested that a proper understanding of computer coding and programming would provide female entrepreneurs with unique opportunities in the modern economy. Ms. Wittstock expressed her concern in seeing so many girls straying from math and sciences as early as the fourth grade, but she was encouraged to see that, as a result of her own entrepreneurial endeavors, her daughter has already demonstrated an interest in entrepreneurship. Ms. Ettus concluded by reinforcing the importance of mentorship and role models, and spoke of the need to highlight the success stories of female entrepreneurs whenever possible.
