Today is Equal Pay Day – a date that symbolises just how many more months’ women need to work to earn what men did the year before. In South Africa, this came under the spotlight recently on the better-known Human Rights Day, where it was reported in a new Ipsos survey that women earn 27% less than their male colleagues.
The survey states that the gender pay gap is widening, with women earning R55 for every R100 that men do. It’s not surprising then to see an increase in the number of female entrepreneurs, looking to boost their income. According to the Real State of Entrepreneurship Survey, male entrepreneurs still dominate the numbers but female entrepreneurs are gaining traction. Driven by Donna Rachelson, CEO of Seed Engine, the survey indicates that female representation has shifted from 35% to 47% over the last three years and overall, 84% of all respondents have worked for at least 1 year before starting their own business.
Whether they are earning more or less than they might have in the corporate world is undetermined but what the survey does indicate, is that only 48% of the businesses reviewed are generating revenue. Their success is attributed to great networks and access to business support services – including funding.
According to Rachelson, the inability to raise funds is the second biggest challenge entrepreneurs’ face, right after finding customers – and while the South African government has prioritised the advancement of women-owned businesses, there is still a long way to go when it comes to funding them.
‘It’s a well-known phenomenon that women struggle more to get funding than men, who are perceived to make better entrepreneurs,’ says Rachelson. This is confirmed by Forbes.com, which states that female entrepreneurs receive less than 3% of all venture capital funding – and by Fortune.com which declares that the funding gender gap is actually getting worse. In part, this may be owing to the reality that very few women are actually at the helm of start-ups but mostly, research suggests that women tend to be judged on their performance while men get rated on their potential. Men are believed to be able to create more influential networks, hold higher-ranking positions and as we already know, command more money, which is intrinsically linked to higher value.’ Basically, women end up asking for – and receiving – less.
Venture capitalists tend to be mostly male for the same reasons and unfortunately, those with money to invest, pick projects that they can relate to and are most passionate about. Rachelson does add though, that ‘the good news is funders just want to make money at the end of the day and if women can break through cultural limitations and tangibly demonstrate their worth, they may just sit up and realise that discrimination only gets in the way of opportunity.’
Rachelson suggests that women take this into their own hands by primarily focusing on business traction, adding that ‘an increasing number of orders coming in will definitely peak investor interest.’ She also adds that ‘demonstrating that their business is bigger than one person, with a powerful team behind it that can support its growth, is equally as vital. ‘Of course, also key to showing growth is knowing what the key financial drivers of their business are and being comfortable talking about them – many women fall down here,’ she adds.
A focused and impactful approach to marketing will go a long way too, as will a crystal clear understanding of target markets and key business differentiators. Rachelson does point out thought that ‘it’s not always possible to wait until everything is perfect before looking for funding. Women tend to be perfectionists and need to practice confidence, which goes a long way towards ‘faking it until you make it.’
Further to the advice she has for women entrepreneurs, Rachelson emphasizes that venture capitalists need to step up their game too. ‘Financiers need to be thinking about what they can do to increase the diversity of their portfolios. Blind funding practices where the gender of an applicant is not disclosed, unanimous partner voting and women actively stepping forward to support other women, are just a few ways in which this could realistically be achieved.
While more research is certainly needed to fully understand the influence of gender on funding and what factors determine a female entrepreneur’s financial success, women need to take action now if Equal Pay Day is ever to become less about the gender pay gap and more about what we are doing to close it.