An entrepreneur with a great idea for a business often needs start-up funds. Finding venture capital is essential, especially as small businesses begin to grow into big businesses.
For women, finding those investment funds is even more challenging than it is for male entrepreneurs.
According to the Columbia-based Maryland Technology Development Corp. (TEDCO) many women entrepreneurs get less venture capital funding.
A Crunchbase News study indicated that, in 2018, just 10 percent of all global venture dollars went toward solely women-owned startups – an increase from previous years; however, that’s still significantly less than the 83 percent of all global venture dollars directed towards men-owned startups.
Similarly, the percentage of global seed dollars in 2018 directed to women-owned startups was just 6 percent, compared to the 80 percent received for men-owned startups.
TEDCO is addressing the funding gap via its new Task Force for Women Entrepreneurs, which will analyze the challenges that women face when accessing seed capital.
At the helm of the task force will be Myra Norton, vice chair of the TEDCO board and president and COO of Baltimore-based Arena; and Jennifer Hammaker, TEDCO vice president of business development, who will serve as chief liaison between TEDCO and the task force.
“We’ve seen research on three primary groups – rural, women-owned and African American – that led to TEDCO launching filter funds, with the pilot focused on the African American funding two years ago,” said Norton. She acknowledged multiple challenges, such as determining “what percentage of the population even decides to start a business, how many are women and how many get early-stage seed money,” which precedes the need for venture capital.
“At this point, we’re assembling a diverse task force with a number of women who have run businesses,” she said, noting it should consist of between eight to 12 thought leaders, and will include men.
Hammaker and other liaisons will include TEDCO’s Angela Singleton, who co-manages the builder fund; and Arti Santhanam, director of the Maryland Innovation Initiative.
“We’ll look to other states with similar programs that we can learn from, too,” Hammaker said. TEDCO and other concerned entities “are rightly focused on disparity,” said Larry Jacob, vice president of public affairs with the Kansas City, Mo.-based Kauffman Foundation, who noted that all women founding teams raised about 2.2 percent of all venture capital in 2017, compared to all male teams getting 79 percent and mixed teams garnering 12 percent (with the remainder non-specified).
In addition to starting task forces to make progress, “We can do a few other things,” Jacob said. “For instance, the foundation has launched Capital Access Labs” in the effort to catalyze financing mechanisms to serve entrepreneurs who can’t access venture capital or bank loans. “Part of this equation is thinking about who is starting the firm and what type of potential and earnings it has. Entrepreneurs need greater access to capital so startups that are making inroads can grow.”
Another avenue is innovation, “which can result in more capital coming from succeeding in a business,” he said. “Employees can make an investment from their salaries, investments or whatever else. It’s similar to when angel capital started, and angels, who are often retired government employees or contractors, could easily make a $5,000 investment.
“I also think there will be ongoing national, state and local policy changes,” he said, “that will get these people to the table earlier and provide more money.”
The task force is being welcomed locally. Mike Binko, CEO with Startup Maryland, cited studies that revealed that decision-making within diverse teams, compared to homogeneous teams, often occurs at an accelerated pace.
“Diverse teams bring diverse perspectives and experiences to challenges, questions and opportunities,” said Binko. “If they’re amplified with empathetic team building and leadership skills, the results are compelling. Diverse teams are also more natural at attracting a more comprehensive customer base, which can lead to faster scale and/or profit.”
Ellen Hemmerly, executive director at bwtech@UMBC Research & Technology Park, called the task force “a much needed initiative for the state of Maryland and for the nation.
Women entrepreneurs of early stage companies face many obstacles in obtaining funding and support. I have seen too many examples of women entrepreneurs being replaced in leadership positions in order to successfully raise funding.
“This initiative,” she said, “and programs like [UMBC’s] ACTiVATE, which supports women building technology companies, are important to help reverse the inequities that female entrepreneurs face.”
Julie Lenzer, chief innovation officer at the University of Maryland College Park, said, “It’s an economic imperative. If we’re not tapping into the good ideas of women, and they’re now a majority, we all miss out. Innovation is not relegated to one demographic or gender. Being inclusive is helped by having role models; if all successful role models we tout are young men, it’s harder for other groups to see themselves in those roles.”
Lenzer added that she was once on a panel about women entrepreneurship – and the rest of the panel members were men. On another occasion, she was on a panel judging a business plan competition, and two of the other judges were white men who wouldn’t consider a plan offered by a women because the product was geared toward African-American women and they didn’t understand it.
“I told them that the product had potential,” she said. “An African-American man on the panel confirmed this. Happily, they were open to our input, but without diverse perspectives so many opportunities are missed
This effort isn’t about lowering the bar, Lenzer said, but rather democratizing opportunities. “The market often decides what turns into a successful business,” Lenzer said, “and raising capital can’t just be about an entrepreneur’s network, family money or old paradigms.”
At a to-be-determined point, the task force will deliver a report to the TEDCO Board of Directors with its findings and recommendations. All involved are hopeful that at least some of the outcomes will be in place by the next TEDCO Expo, which will be held on Oct. 29, again at The Hotel at College Park.
Norton is optimistic that the collaboration will have a solid result.
“It will take a village, because it’s a global problem and we want to connect with folks outside of Maryland, too,” she said. “The reason we’re doing this now is TEDCO identified that we have good programs, but we also need to see where we are missing the mark.”