Small Business

'Shark' looking to invest in more women-led start-ups

Bridging the gender funding gap
Bridging the gender funding gap

Businesses owned and operated by women know first-hand a gender gap exists when it comes to accessing venture capital. The vast majority of cash goes toward start-ups founded and led by men.

But investors and business leaders including "Shark Tank" investor Kevin O'Leary are working to change this trend. While every investment situation is unique, O'Leary and other entrepreneurs say lack of men on the leadership team, or a focus on "crafty" businesses like baking can be held against women entrepreneurs as they try to raise cash.

Looking beyond those biases, however, and investing in more female entrepreneurs can pay off big. More than a third of O'Leary's portfolio of businesses are either owned or run by women. The returns from these companies are on average 75 percent higher than his businesses led by men, he said. "It's just facts for me. At the end of the day this is returns," O'Leary said. "I am backing more women because I am making more money with them."

But O'Leary is not the norm. A 2014 study on women entrepreneurs from Babson College found only 2.7 percent of the companies that received venture capital funding, from 2011 through 2013, had a woman chief executive. Additionally, businesses with a woman CEO received 3 percent of the total venture capital dollars invested — $1.5 billion of a total $50.8 billion invested overall.

Separate research from the Kauffman Foundation cites women also launching ventures with roughly half as much capital as men, and also less likely to access networks of close friends and acquaintances to help them secure funding.

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One investment that O'Leary is glad he made — a royalty deal with Tracey Noonan of Wicked Good Cupcakes in Cohasset, Massachusetts. The small business, that sells cupcakes in a jar, landed a $75,000 investment on "Shark Tank" in 2013.

Noonan said her own funding history was fairly simple. She bootstrapped her open operation initially, then applied to appear on "Shark Tank" on a whim and landed an investment.

But Noonan said she understands the struggles some women entrepreneurs face. A business model and chosen industry of focus can be held against female business owners.

"Because I am in a crafty business and we bake, I am not always taken seriously," Noonan said. "People don't realize the scope of the food industry, especially if they're not involved," she said. "I think being taken seriously as a woman is an issue."

O'Leary added that there's also a bias against ventures led by lots of women.

"I think that what happens to them [women] when they go out to raise venture capital, and they show up as a company [run by one or two women], people say, 'Where is the rest of your team?' There is that kind of bias," O'Leary said. "I don't have that bias anymore, because I have results."

Looking ahead, O'Leary says such biases need to be overcome as women entrepreneurs execute results. Women are natural leaders, take calculated risks and set achievable goals, he said.

"Overall as an economy, we're not taking advantage of what women bring to the table," O'Leary said. "I don't see any reason why we don't put more women in board seats, as CFOs, CEOs, CTOs. Just look at the results."

A September study released by McKinsey & Co. and Facebook executive Sheryl Sandberg's found women remain underrepresented at every corporate level — from entry-level professionals to C-suite executives. Among CEOs and other chief officers in the C-suite, women represent only 17 percent of the population, up slightly from 16 percent in 2012.

"I have made my decision for the rest of my investing life; I know what I am doing," O'Leary said. "I am talking about making money, and I am making money with women. Period."

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