Today, women own four out of every 10 businesses in the U.S.
Why Women are Choosing Entrepreneurship
There are a variety of reasons that women are choosing to start their own businesses rather than climb the corporate ladder:
- To have more flexibility. Women entrepreneurs have dual responsibilities to their business and to their families and may prioritize flexibility over money.
- To charge what they’re worth. Women still get paid less than men, and research shows women won’t reach pay equity for 100 years.
- To advance more quickly. Although women are just as likely as men to want a promotion, women are 15% less likely to get promoted.
Bridging the Funding Gap
It’s no surprise that funding is a critical component of business success. Unfortunately, female founders have a more difficult time securing funding than their male counterparts. The first step in addressing this challenge is understanding what sources of funding might be available to you.
Bootstrapping
Bootstrapping is building a company from the ground up with nothing but personal savings, assets and the cash coming in from sales. Some bootstrappers also tap into personal insurance and investments, bank loans, credit cards or even retirement accounts to fund their startup.
Friends & Family
Financial contributions from friends, family and co-workers are common sources of startup funding; but this kind of arrangement is hardly a stress-free loan as mixing personal relationships and money can be challenging.
Crowdfunding
Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding leverages social media and crowdfunding websites such as Kickstarter and iFundWomen to connect entrepreneurs with potential investors.
Grants
Small-business grants from private foundations and government agencies are another way to raise startup funds for your small business. One advantage of this type of funding is that it doesn’t require you to give away a piece of your business.
Angel Investors
These are affluent individuals who provide capital in exchange for convertible debt or ownership equity, typically in the very early stages of a business.
Accelerators
These programs typically include seed investment, connections, mentorship and education in exchange for equity. Accelerators often culminate in a pitch event or demo day which connects founders with potential investors.
Venture Capitalists
These are investment firms or funds that provide capital to start-ups with high growth potential in exchange for equity.
Not all funding types are suitable for each founder or startup. Sometimes, the long-term costs are too high, the values don’t align or the relationships are too important to risk. You want to find the funding type that’s “just right” for your business and the vision you have for growing it. If you need help understanding and narrowing down your funding options, talking to a mentor or an experienced financial advisor can help you determine which avenues may be best for you.
Disclosures
Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.
Lisa Shelton is a Financial Advisor in Vancouver, Washington at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). She can be reached by email at Lisa.Shelton@morganstanley.com.
Brooke Lowery is first vice president, financial advisor and financial planning specialist at Morgan Stanley Smith Barney LLC. She can be reached at Brooke.Lowery@morganstanley.com.
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