MarketWatch: Women Entrepreneurs Are More Likely to Rely on Their Own Credit and Home Equity Loans
This post originally appeared in MarketWatch on July 31, 2018.
Lori Cheek thought investors would flock to her startup dating app after it was profiled in both the New York Times and Wired. But the high-profile press did little to attract the money she needed to get her business off the ground.
After exhausting 15 years’ worth of savings from her previous career as an architect, Cheek desperately needed more funds to continue to build out her business, an app that lets users meet potential mates without giving away sensitive personal information.
“I must have met with nearly 50 investors during my startup struggles,” she told MarketWatch. Most of the potential funders were run by men. “A lot of them straight up told me I should quit. I can’t say for sure that it was because I am a woman, but it easily could be.”
Cheek isn’t alone. While successful female-founded businesses like Kylie Jenner’s $900 million makeup line and Gwyneth Paltrow’s $250 million wellness empire garner plenty of press coverage, they’re far from the norm.
Women who try to launch their own businesses are at a significant disadvantage compared to men, according to a report published this month by the Institute for Women’s Policy Research. The report found:
- Men are twice as likely to receive over $1 million in funding.
- Women are 1.1 more likely to use their own credit and take out home equity loans to finance their business.
- Men-owned businesses are twice as likely as women-owned businesses to have either a granted patent (1.5% compared with 0.7%) or a pending patent (0.9% versus 0.4%). This decreases their chances at obtaining funding given that investors 74% more likely to raise venture capital funding to launch their business within three years, according to a 2016 report published by Joan Farre-Mensa, a professor at Harvard Business School and Deepak Hegde, a professor at New York University’s Stern School of Business.
- Women are less likely than men to hold intellectual property rights, yet more likely to engage in product innovations and continually update and revise their products before they bring it to market.
In 2017, only $1.9 billion (2%) of the $85 billion total invested by venture capitalists went to female founders, according to PitchBook, a financial data and software company.