Report: Female entrepreneurs struggle to get funding due to perception they are more ‘risk-averse’

bmo

A report released Carleton University, BMO Financial Group, and The Beacon Agency suggests that the perception that women are less willing to take risks than men is hampering their ability to receive funding.

The report includes two years of research reviewing reports on women’s entrepreneurship in Canada and the USA, as well as interviews with 100 female entrepreneurs. It detailed several barriers to women securing funding for their businesses, including both the perception that they are more risk-averse, and a lack of awareness surrounding funding options available to them.

“Existing literature and studies place too much emphasis on taking risk as the ultimate goal,” the report said. “Such overemphasis on risk mainly stems from the tendency to frame it with an outcome-oriented vocabulary such as ‘take’ risk, ‘avoid’ risk, and ‘averse’ risk, which leads many people to intentionally or unintentionally focus more on the outcome of female and male entrepreneur’s risk-taking behaviour.”

The report said that female entrepreneurs tend to perceive risk both in terms of economic and social value — such as hiring the right person or the impact a decision will have on their business’ reputation — which differs from traditional approaches that consider risk mainly from an economic point of view.

When women do receive funding, they are more likely to make decisions related to risk necessary to pursue their entrepreneurial intentions — however, the very issue of limited access to funding prevents women from taking these risks to expand and develop their companies.

In one study cited by the report, women-owned businesses were less likely to seek equity financing than male-owned businesses, but when they did, they were just as likely to receive equity financing as men. In contrast, when it came to accessing external debt-equity financing, the proportion of venture capital investments in women-led businesses was small. Companies with male CEOs attracted more external financing than companies with female CEOs; companies with female CEOs only received 3 percent of total venture capital funding amount to US $1.5 billion, compared to the total of US $50.8 billion invested during the period of 2011-2013.

“Despite the evidence that female enterprises are increasing in number, financial institutions and investors have not fully understood or supported their resource needs to start and grow their businesses,” the report said, naming support from professional networks, business forums, and access to mentors as key to influencing a female entrepreneur’s decision to start and expand businesses. “Such social sources of support can provide access to information that helps entrepreneurs to recognize opportunities for new venture creations and business growth.”

To access the full report, check it out here.

Jessica Galang

Jessica Galang

Freelance tech writer. Former BetaKit News Editor.