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Women Struggle to Shatter Glass Ceiling
NJBiz February 22, 2010
Finding capital to grow a business has monopolized business conversations for more than a year. Business owners are wondering if any of the TARP money will ever reach them. Although some financial institutions are beginning to lend again, a pre-existing gap between women-owned businesses and those owned by men is beginning to widen. It is the “capital gender gap,” or, for a female entrepreneur, the glass ceiling.
After depleting ones’ own reserves, an entrepreneur often turns to friends, family and banks, and then to investors or venture capitalists, depending on the amount needed. Unfortunately, some banks will lend only if the company has been in business for two or more years, and the owner has a credit rating over 700 and personal collateral to secure the loan.
Also, the majority of investors and capital venture firms will only consider IT/technological or science-based businesses, of which women usually are not owners. Women tend to own businesses in the apparel, retail, food, health, or skin care industries. Furthermore, many investors will not consider an investment lower than $1 million, and women usually are seeking less than $1 million.
Studies and research have shown the continued disparity between businesses owned by women and men. Lack of access to capital is the No. 1 reason women-owned businesses are not growing at the same rate as their male counterparts, according to a Spring 2009 report from the National Women’s Business Council.
In January 2001, Patricia G. Greene, Candida G. Brush, Myra M. Hart and Patrick Saparito published a report in Venture Capital Journal called, “Patterns of Venture Capital Funding: Is gender a factor?” Based on their research, they documented the first evidence showing participation of female entrepreneurs in the venture capital arena. Between 1997 and 2000, (the boom years for venture investing in the United States), only about 5 percent of venture capital dollars went to women-owned businesses. Recent studies have shown no evidence to suggest this percentage has changed in any way.
Why is this topic important? According to the Center for Women’s Business Research, female-business owners staff more than 23 million jobs nationally. In a 2002 U.S. Census report, New Jersey women owned 26 percent of all firms in the state, provided 7 percent of the jobs and start up twice as many businesses as men; yet women only generated 4.2 percent of revenues. Imagine the impact on our state’s economy if the capital gender gap did not exist.
Women entrepreneurs must perform their due diligence so they are prepared when the opportunity to pitch presents itself. There are great resources available from the Small Business Development Centers, UCEDC, Institute for Entrepreneurial Leadership, New Jersey Association of Women Business Owners’ Women’s Business Center and SCORE.
Recently, an angel investor lamented to me about the huge void in that financing arena: the lack of consideration toward businesses typically owned by women. They are the businesses one would find lining Main Street; they are not technologically based, but could benefit from technology. They are owned by driven, dedicated women who have a vision and want to succeed. Understanding and recognizing the potential in this greatly underserved market holds a wonderful opportunity for women, angel investors, our state and country.
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Melissa Gasnick-Cloeter is co-founder of Entrepreneur Expose’ based in Hackettstown.
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