In 2009, Jennifer Freitas walked into a bank to secure a loan for her clean beauty business. She was only 29 at the time but was in a better financial position than most of her peers: no debt and enough money in her account to guarantee the loan. Still, she was denied. A second bank did approve her application on one condition—her dad would need to co-sign.
When Danyelle Templeton first approached her bank for a small business loan, she felt like it was a no-brainer. Her business was thriving, she’d always made payments on time, and she was a longtime client. She was also denied. The explanation from the bank? Her debit card had been stolen and her account compromised a few times. The bank representative “made it seem like it was my fault,” Danyelle says. “I had been with this bank for 10 years.”
In the U.S., women-owned businesses now represent 42% of all businesses, growing in number at more than twice the rate of businesses as a whole. They employ 9.4 million people and report $1.9 trillion in revenues. Yet 62% of women entrepreneurs report that they experience some form of gender bias during the funding process.
Small business loan applications by women are rejected more frequently, and when they are approved, women pay higher rates.
Gender bias and the wage gap—the disparity in median earnings between men and women—has been a hot issue in media and politics in recent years. In 2019 in the U.S., women earned 79 cents for every dollar earned by men. This ratio is partially explained by factors like women holding fewer senior roles (the “opportunity gap”), disproportionate parenting responsibilities, and lower-paying roles in women-dominated sectors. But discrimination is also real—even with equal pay legislation, some women are simply paid less for the same job than their male counterparts.
Despite huge strides made by women in business, the gender gap exists within entrepreneurship, too. When Jennifer was denied a business loan by two banks, she couldn’t help but wonder: would the outcome have been any different if she were a man? Maybe. Small business loan applications by women are rejected more frequently, and when they are approved, women pay higher rates. In 2018, the average loan size for women-owned businesses was 31% less than that of men-owned businesses.
Jennifer begrudgingly accepted the second offer (co-signed by Dad) and used that loan to grow The Truth Beauty Company, a bricks-and-mortar clean beauty store in Ontario, Canada. She paid back the debt on her own and, in 2016, she was ready to expand to a second location. She approached the same bank to refinance and was again denied unless her father guaranteed. Instead, the bank offered her a credit card.
Self-funding: a double-edged sword
Almost 63% of women-owned businesses were funded with their founders’ own savings. When we factor in the experiences of women in the funding space, however, self-funding in some cases may be due to necessity rather than choice. Those who choose to bootstrap may also do so because rapid growth isn’t their goal. Achieving success through slower, self-funded growth means retaining control and independence. But it sometimes comes at a cost.
Over the past 10 years, Jennifer bootstrapped and reinvested, expanding her business to two physical locations and an online store. She has garnered press and she often mentors other young enterprising women. She’s one of the successful ones. But her experiences with explicit sexism while pursuing startup capital has had a trickle-down effect.
If I had $1,000 to give to a lawyer, I probably could’ve had a better lease. But when you’re really under-financed, you take shortcuts.Jennifer Freitas
Because she has had to rely on herself to grow her business, Jennifer says she’s had to make sacrifices. “I haven’t been able to purchase a home and I’m still not paying myself,” she says.
Jennifer negotiated her own lease for her first location rather than paying for legal advice. But when her store’s toilet broke and the landlord referenced the lease, she discovered it legally was her problem to fix. “If I had $1,000 to give to a lawyer, I probably could’ve had a better lease,” she says. “But when you’re really under-financed, you take shortcuts.”
Held to a higher standard
The gender bias wasn’t initially obvious to Gail Goodman. In 2015, the founding CEO of Constant Contact took her company public and sold it for $1.1 billion. She recalled the struggle of pitching the first time around but chalked it up to her inexperience. When raising funds for her next venture, Pepperlane—a business that helps moms start home-based businesses—Gail was already a proven entrepreneur. “I’m on the board of Shopify, too” she says. “I’m not a kid.” Still, she was facing the same resistance she experienced as a younger, greener business owner. “We literally had men say to us, ‘My wife wouldn’t do that.’”
Women are held to higher standards than men during the pitching process due to the misconception that they are riskier investments.
As of 2018, only 14% of investment partners at Venture Capitalist firms were women. That low ratio may help explain why only 2.3% of funds from VC sources were invested in women-owned businesses in 2019. This discrepancy is often explained away by the assumption that women are more risk-averse than men and therefore likely to apply for less funding, if any at all.
Some studies support this belief. However, others also suggest this is a learned behavior. Social expectations, in some cultures more than others, continue to urge girls to be demure and boys to be brave. And, because of the perception that women as a whole are more risk-averse, those entering the field of entrepreneurship are already at a disadvantage. It can impact confidence and instill doubt. Jennifer sees this play out in her peers. “Women often don’t call themselves ‘CEO.’ They're, like, ‘chief lipstick picker,’” she says. “They downplay what they’re doing.”
Where bias is unquestionable in the VC funding process is during the vetting phase: women founders are asked questions about potential for failure and men about potential for success, says one study. Another finds that women are held to higher standards than men during the pitching process due to the misconception that they are riskier investments. In reality, 92% of investors polled say that businesses owned by women achieve returns at or above market.
When Gail was raising for Pepperlane, one VC firm with zero female investors pulled a young woman who worked at the company into the pitch meeting. “It's like they scoured the firm and were like, ‘We must have someone who's female and whose mom actually works,’” she says. “This poor woman had never been in a pitch before.”
The emotional labor gap
Danyelle is the founder of haircare brand Hair of Nature. She’s also a full-time flight attendant. And a mom. She’s twice been denied loans through traditional financing. Without the much-needed funding, Danyelle has been growing her business more slowly than she’d like. The goal is to eventually run Hair of Nature full time, with a flexible schedule that keeps her closer to home. “I’m trying to run a business, put in time to be a mom, and be able to find that little ounce of personal time,” she says. “It’s a lot.”
Gender inequality is alive and well in the home. Studies conducted over the past few decades show that men are more involved in parenting than they were in the 1960s, but mothers still spend twice as much time on parenting duties—even in dual-income households. And mothers spend 10 more hours per week multitasking than fathers. Outdated societal conventions and media continue to idealize the role of the mother, placing more of the parenting pressure on women’s shoulders. “We have this horrible cultural norm,” Gail says, “where you’re supposed to work like you’re not a mom and parent like you’re not working.”
They want to hear you’re going to work 80 hours a week with no other priorities.Gail Goodman
At Pepperlane, Gail and her team help mothers find a path to entrepreneurship that fits their lifestyles. Many of these women aren’t looking for funding for their part-time home-based businesses. But when someone does ask Gail for tips on getting funded? “The advice I give people,” she says, “and I hate it as I say it, is don't let them know you're a mom.”
It’s not ideal, Gail says, but the reality is that motherhood can be seen as a negative to an investor. “They want to hear you’re going to work 80 hours a week with no other priorities,” she says. This just isn’t the reality for parents like Jennifer and Danyelle. “I can’t do everything at the drop of a hat,” says Jennifer, a single mom. “I also have to get groceries in the fridge and attend the kids’ Christmas pageants. When they’re sick, there’s nobody else. It’s me.”
Beyond the gender bias
Jennifer is incredulous about her experiences with the bank but understands she’s still in a better position than many. “I’m a white woman who’s educated and I have money in my account,” she says. “Can you imagine if I had other barriers?”
Women of color now own 50% of overall women-founded businesses in the U.S., and in many cases, they have exceeded the performance of other entrepreneurial groups. But when it comes to accessing funding, gender bias is compounded by racial discrimination.
There’s funding available, but there’s always some kind of restriction and barrier to it.Jenn Harper
When Danyelle was denied funding despite her glowing financial history, she was confused. “I felt like it was because of my skin color, being an African American woman,” she says. She noticed that pivoting her target audience from Black women to “women with thick curly hair,” helped the bank conversations but still didn’t result in funding. The numbers reflect experiences like Danyelle’s—minority women are underfunded and underrepresented in VC firms:
- Black women represent the highest rate of growth over any other group, according to one report. Yet, only 0.0006% of VC funding went to Black women founders between 2009 and 2017.
- In the same period, only 0.32% went to Latin American women founders, and there is little representation in VC firms.
- As of 2019, the number of businesses owned by Asian women in the U.S. has topped 1.1 million, and their businesses produce average revenues higher than women-owned businesses of any other group. But representation in VC firms is also still lacking, with only 6% of investors being Asian women.
- In Atlantic Canada, businesses owned by Indigenous people contributed $1.6 billion to the regional economy between 2012 and 2016, and those owned by women dominated sales growth (70% versus 50% for men) during the same period. Still, Indigenous women report that access to funding and resources continues to be a barrier.
Jenn Harper, founder of Indigenous beauty brand Cheekbone Beauty, self-funded for the first few years of her business. When she was ready to scale, she faced challenges in accessing the available funding, even though she’s seeing an increase in grants and programs available for Indigenous businesses. “There’s funding available,” she says, “but there’s always some kind of restriction and barrier to it.”
Many of the studies around gender bias and funding focus on simplified and non-inclusive gender: men versus women. Transgender and non-binary people are often not explicitly called out in the data or simply excluded from gender bias research altogether. What is well-documented, though, is that these groups experience discrimination, harassment, and bullying in all areas—including in the workplace and when striving for professional growth or creating self-employment.
One report suggests that the imbalance in access to capital for women and minority-owned businesses represents $4.4 trillion in missed revenue. When opportunities are unfairly limited for women with high-potential businesses, they do not have an equal chance to prove themselves in the market. It is therefore not only a missed opportunity for revenue but also great ideas.
Creating more opportunities for women creates more opportunities for everyone. “There are really very few zero-sum games in the business world,” Gail says. “The more we foster entrepreneurship, the more we will create local jobs and local economies and support better school systems that create more entrepreneurs.”
Enough of us need to succeed so that we can then say, ‘I’m a CEO and a mom, and the mom card is relevant.'Gail Goodman
Paving the way
It’s the women at the head of the pack, Gail says, who will help change attitudes around motherhood and business. “Enough of us need to succeed so that we can then say, ‘I’m a CEO and a mom, and the mom card is relevant.’”
Gail sees her dual role as parent and CEO as an asset. “I come to the table with more empathy. I come to the table with a more balanced view of the world. I run an employee-based organization with more compassion,” she says. And women founders in general have healthy attitudes toward work-life balance—64% polled in one study said that they provide family benefits, despite the high costs for small businesses.
Finding the right funding
“At one point you need extra capital; you need that,” says designer and founder Regine Chevallier. “But I think it’s important to find the right funding—the partner who really believes in your vision.” When Gail was raising funds for Pepperlane and encountered gender bias in the process, she approached Broadway Angels, an angel investment group comprised entirely of women. “They started making calls for us,” she says. “All the magic opened up.” Pepperlane ended up getting classic VC funding thanks to the contacts it made through Broadway Angels.
Women-focused organizations like Pepperlane and SheEO, VC firms like SoGal and True Wealth Ventures, and government initiatives continue to pop up, creating more access to funding and resources for women.
The world never saw us building empires before.Regine Chevallier
For Shopify store owners, funding through Shopify Capital is an option that skips the lengthy application process and determines eligibility based on a store’s merit—not gender. You can use Shopify Capital to support everything from marketing efforts to payroll funding.
Danyelle is already on her second round of funding. “I don't have to go through the whole credit check and somebody getting my hopes up,” she says. “And I know exactly what I’m going to get and what I can use it for.” Repayment happens automatically, via a percentage of her daily sales, and it’s one less thing for this busy mom to deal with. “I think it’s great,” she says. “The money comes out and you don’t even see it.”
Shopify Capital has provided access to over $750 million to business owners like Danyelle since launching in 2016.
Women supporting women
Incremental change, thanks to the growing number of women CEOs and VC investors, is already happening. Still, it’s estimated that it will take nearly a century to close the global gender gap. A culture and community of women supporting women is a start, Gail says. “You, as one individual woman, are not trying to change the world for all women,” she says. “You can’t take that on.”
Regine, however, is optimistic about the future. She does acknowledge that she’s had to work harder than the men around her while building her brand. “We, as women, need to prove ourselves more, we need to make more effort, we need to knock on more doors,” she says. But she looks to the progress made by trailblazers like her idols, Sophia Amaruso and Sarah Blakely. “This was not heard of 50 years ago,” she says. “The world never saw us building empires before.”
Illustrations by Hanna Barczyk
Additional research by Lauren Cauchy