HHWM Investment Insights: The Essence of Evidence-Based Investing
Written by Jason Hiley
Written by Jason Hiley
The number of women who own businesses in the United States has grown exponentially over the past several decades. In 1972, only 402,000 businesses in the U.S. were owned by women. Compare that to the 2018 count of 12.3 million women-owned businesses. In fact, women own 4 out of every 10 businesses in the U.S. today. Additionally, women are slightly more likely to start a business than men.
Despite the progress women have made in entrepreneurship and business ownership, trouble still lies in a lack of venture capital funding for women-owned businesses. In 2018, $130 billion in venture capital funding changed hands. Female founders only gained 2.2 percent of this money, which means that male founders received almost 98 percent of total funding.
The gender gap in funding for female and male owned businesses is appalling. And it’s hard to unravel the reasoning behind the funding disparity. That is until you look at venture capital firms demographics. fewer than 10% of decision-makers at U.S. VC firms are women, according to a 2019 Axios analysis, which determined just 105 investors out of 1,088 were female.
You may be asking, why does this matter? Because people relate to (and invest in) what they know. That means, while there are certainly women-owned businesses that appeal to male customers and investors, there’s also plenty that are targeted to women and women-specific issues.
For example, look at this quote from Katrina Lake, CEO and founder of the online clothing subscription service, Stitch Fix:
“I think that intangible stuff really matters. I had an investor say, ‘I think you’re amazing, but I have to pick one or two board seats a year and where I feel really passionate about the business, and I don’t think I can be passionate about women’s dresses and retail.’”
This quote certainly highlights the need for more diversity in venture capital firms.
Women make up roughly half of the U.S. population, and own 40% of businesses. And since women are more likely to relate to other women, venture capital firms that are run by women and set up to support women’s businesses are starting to emerge.
If the past 40 years is any indication of what we can see in the future in regard to women-owned businesses, we need to improve funding opportunities to support female entrepreneurs.
At Hiley Hunt Wealth Management, supporting women and their financial goals is one of our key pillars. Whether they are the breadwinner for their family, recently divorced or widowed, we want to help women understand their options to secure their financial future. Contact us today to discuss how we can help create the right plan for you.