Women Entrepreneurs: Innovative Approaches to Financing New Businesses

Event Overview & Context

• The Milken Institute, in partnership with George Washington University, convened a panel on women's entrepreneurship and capital access, featuring representatives from the SBA, Wells Fargo, Calvert Foundation, and Golden Seeds.
• The Institute has a 20-year history of studying capital access for women, including 2000 reports with the SBA and National Women's Business Council, and an ongoing program led by Nancy Oseas and Mindy Silverstein.
• Current initiatives include research on crowdfunding, infrastructure investment, and a new program to catalyze foreign direct investment in underserved emerging markets.

Market Data & Trends

• There are approximately 8 million women-run businesses in the U.S., representing a significant opportunity for job creation if capital gaps are addressed.
• Women are one of the fastest-growing segments of entrepreneurs, with female-led business ownership rising from 5% to 30% of small businesses.
• Women received only 13.5% of angel investment and a similar low percentage of venture capital funding in the most recent reporting period.
• While the yield rate (funding success percentage) for women entrepreneurs increased in the angel market, the absolute number of women seeking funding and the total capital invested declined compared to the previous two years.
• The "valley of debt" remains a critical gap for early-stage, pre-revenue companies that are too advanced for friends-and-family funding but too risky for traditional bank loans.

Investment Criteria & Strategies

• Golden Seeds (Peggy Wallace): As the fourth-largest angel group by membership, they have a 2% yield rate and a $35 million fund; they require a woman in a C-level position with significant ownership to ensure team diversity.
• Data on Teams: A Harvard study of 192 teams found that gender-diverse teams outperform all-male teams, while all-female teams perform better than all-male teams but less than diverse ones.
• Investment Focus: Investors target billion-dollar addressable markets, seeking scalable, disruptive companies with proven business models and clear paths to exit (e.g., acquisition at $20M–$100M+).
• Wells Fargo: Has lent $45 billion to women-owned businesses since 1995, with typical loans ranging from $50,000 to $200,000, primarily in service industries, government contracting, and professional firms.
• SBA (Karen Mills): Holds a $90 billion portfolio of loan guarantees, with a 3x to 5x higher success rate in funding women and minority-owned businesses compared to the general market; they also manage a $100 billion supply chain for federal small business contracts.

Barriers & Structural Gaps

• Networking & Bias: 97% of the venture capital industry is male, creating a "club" culture where women lack natural networks; women are often perceived as "too old" or having "hybrid" business models that do not fit the traditional "young engineer" VC archetype.
• Societal Perceptions: Fewer women are asking for funding due to a cultural aversion to networking, viewing it as a "dirty word," and a lack of exposure to venture capital as an asset class.
• Main Street vs. High Growth: Main Street businesses (often micro-enterprises started in homes) struggle to access traditional capital due to size and lack of collateral, while high-growth tech startups face hurdles related to early-stage risk and IP valuation.
• Skill Gaps: Entrepreneurs frequently lack proficiency in accounting fundamentals, coding, and self-promotion (e.g., under-selling achievements in elevator pitches), which hinders credibility with investors.

Policy & Solutions

• SBA Initiatives: New legislation implements special set-asides for women-owned businesses in federal contracting, aiming to triple the number of registered women-owned businesses in the registry.
• Microfinance & CDFIs: Calvert Foundation facilitates "Women Investing in Women," allowing individuals to invest as little as $20 to fund microfinance institutions serving entrepreneurs with fewer than 50 employees.
• Crowdfunding & JOBS Act: Panelists view the JOBS Act's crowdfunding provisions and the IPO "on-ramp" (reducing Sarbanes-Oxley barriers) as transformative for small-scale capital formation and public market access.
• Accelerators: There is a critical shortage of gender-specific accelerators; current models often admit only three women per program, necessitating a push for more female-focused support networks like Springboard Venture Forum and Astia.

Forward-Looking Statements & Recommendations

• Inter-generational Wealth Transfer: As women live longer and control more wealth, there is a strategic opportunity to align disposable capital with values-driven investing in women entrepreneurs.
• Educational Shifts: To fix the pipeline, experts advocate for teaching girls coding and financial literacy as early as the fourth grade to reduce fear of technical and financial domains.
• Cultural Change: Success requires shifting the narrative to celebrate women founders (e.g., recognizing ZipCar and Green Dot) and normalizing work-life balance, as seen in entrepreneurs who successfully transitioned from corporate roles to founding businesses while raising families.
• Actionable Advice for Entrepreneurs: Women are advised to secure technical co-founders, master accounting and cap tables, build diverse advisory boards, and persist in networking outside their immediate circles to access capital.
• Future Outlook: The SBA and private sector aim to expand early-stage funding through new billion-dollar commitments and increased focus on manufacturing and tech sectors traditionally dominated by men.