RSS

Contact us

Thursday 4 December 2008

Ladies, bring us your business plans

Venture capitalist Bruce Macfarlane says women are a better risk than men, yet they rarely ask him to back them

You have to question whether all the state and quango initiatives to empower and inspire female entrepreneurs are poorly directed or just plain patronising: the annual ‘Women’s Enterprise Day’, for example, and the ‘Women’s Enterprise Task Force’. The problem seems to be one of definition. The venture capital industry exists to provide equity risk capital to fledgling businesses in which the entrepreneur expects to walk away guiltless if things go wrong but be handsomely rewarded if they go right. That appears to be an essentially male dynamic. With notable exceptions, women seem to respond to different values and incentives.

If entrepreneurship is defined to include all forms of individual business activity, then women are as well represented in business as they are in the professions. Advertising and recruitment agencies, retail outlets, bed and breakfasts and hairdressing establishments would all count. Crucially, however, these sorts of businesses rarely rely on external investment. Outside financing will typically be by way of bank loans. A former governor of the Bank of Scotland used to say that the female hairdressing sector was the bank’s best credit risk: women have a better track record than men of building businesses responsibly and honouring their contractual obligations. That’s probably why the vast majority of borrowers from microfinance institutions in poor countries (up to 95 per cent of borrowers in some cases) are women. But from a venture capital perspective the problem is that these sorts of businesses can rarely accommodate sophisticated equity investors with target rates of return and planned-exit requirements. It probably explains why we see so few women with business plans.

The genders seem to divide in how they calibrate risk. While male entrepreneurs will, famously, overestimate their market opportunity and underestimate the threats, female entrepreneurs are typically more cautious and more scrupulous in assessing the requirements for success. This inclines them towards an ownership structure that retains control, avoids dilution and is conservatively funded. We recently lost a deal we were keen to do, in which the chief executive was a woman (the first we had seen for some time), because we believed the business would grow faster with more capital than the management team were seeking.

More articles from: Bruce Macfarlane | this section

Print this article  |  Email to a friend  |  Permalink  |   Comments (1)

Post this entry to:   del.icio.us | Digg | Newsvine | NowPublic | Reddit

Advertisement

Spectator Business | Apollo Magazine

Corporate | Advertising | Privacy | Terms

Spectator, 22 Old Queen Street, London, SW1H 9HP

All Articles and Content Copyright ©2008 by The Spectator | All Rights Reserved