RECRUITMENT

WOMEN IN BUSINESS
WWW.WSBA.COM.AU
Outdated views shut entrepreneurial
women out of capital markets
ENTREPRENEURS
By Andre Sammartino
Senior Lecturer in International
Business & Strategic Management
at University of Melbourne
DESPITE considerable success in the international
arena, many female entrepreneurs
still struggle to raise capital. New
research suggests that lenders may have
an outdated concept of what an entrepreneur
looks like.
We recently surveyed 416 Australian
female businesswomen, and complemented
the survey with focus groups.
Of survey participants, 183 were female
business owner-operators – what most of us
would call entrepreneurs. We found that over
a third (35%) of these female entrepreneurs
who operated internationally had recorded
sales growth of more than 40% over the previous
12 months.
The growth is even higher among those female
owned and operated businesses that had
internationalised in the past five years, with
52% reporting sales climbed by more than
40% in the past year. Employment growth
paralleled sales growth, indicating promising
gains for the Australian economy.
There was, understandably, a strong
appetite for more growth. Most of these entrepreneurs
(74%) were looking to expand the
number of countries in which they operated in
the near future.
Unfortunately, our data point to some
substantial constraints to these internationalisation
ambitions, which we view as a possible
handbrake on future growth of the Australian
economy.
Australian capital markets
The most significant is shortcomings – and
possible discrimination – in the Australian
capital markets.
As this is the second time we have run this
survey (see a discussion of the initial report
here), we were able to track some respondents
from year to year.
Of the women in our first survey who
indicated an intention to expand, 60% did
so. This longitudinal panel also allowed us to
track changes in perceptions of barriers over
the past 12 months.
Internationalisation should become
easier over time for any given businesswoman
through experiential learning, mentoring, support
networks and the like.
However, this wasn’t the case for many.
Over half (52%) of the entrepreneurs reported
“lack of alternative sources of capital” was a
greater barrier to their international expansion
than it had been 12 months earlier.
So how do female entrepreneurs fund
their start-ups and their expansion?
Most women we surveyed rely primarily
on personal savings and reinvested profits to
fund expansion. Only 21% of the entrepreneurs
we surveyed had attempted to borrow to
fund internationalisation.
Of these attempts, only 27% were successful.
A tiny proportion (4%) of the owneroperators
who are yet to internationalise have
tried to borrow to fund international business
opportunities. None have been successful.
We asked the 78% of internationally-engaged
owner-operators, and 96% of not-international
owner-operators who had not sought
funds for international business expansion
why this was the case.
Risk of borrowing
Around a quarter of these women (23%
of the internationally-engaged, 28% of the
not internationally engaged) said they were
discouraged by an inadequate track record or
insufficient security.
An additional 17% of internationally engaged
owner-operators viewed the risk of such
borrowing as too high.
The sophistication of Australia’s banking
system, and our low cost of capital relative to
many emerging economies, should be a source
of advantage to Australian entrepreneurs.
Despite weathering the GFC relatively unscathed,
Australia’s institutions appear excessively
conservative and risk averse. Among the
internationally-engaged female entrepreneurs,
23% rated the level of ease in accessing finance
for international expansion as very difficult,
and 32% assessed it difficult. Only 2% graded
it as very easy, and 8% as easy.
Slightly more than a third of owneroperators
(36% for both the internationalised
and not-yet-internationalised groups) claimed
financial institutions did not offer an environment
in which they felt at ease discussing their
financing needs.
Around half the respondents advocated
better information about funding options
available to entrepreneurs. Many also called
for simpler processes and streamlined paperwork,
and for lenders to explore offering more
flexible loan terms.
Many female owner-operators appealed
for more face-to-face contact with lenders and
consistency of personnel, and for financial
institutions to employ staff who better understand
running a business.
Lenders and gender
Almost two fifths (39%) of the internationally
active entrepreneurs felt their
gender made a difference to their access
to finance. This number was considerably
higher (52%) for those who were yet to
internationalise.
Of the internationally active female
entrepreneurs, 62% are more than 50 years
of age – certainly not the stereotypical entrepreneur,
who is typically depicted as an
assertive, outspoken young man.
However, the banks might want to consider
what they’re missing out on.
As debtors, these entrepreneurs are safer
bets than most. The women in this entrepreneurial
group are very well-educated (78%
hold a bachelor degree or higher). They
have more life and business experience
than their junior competitors and 50% have
international business experience, typically
for five or more years.
In focus group discussions, a number
of the owner-operators pointed the finger
not just at lending institutions, but also the
regulatory constraints on other potential
funding sources such as superannuation and
managed funds.
Tellingly, venture capitalists and angel
investors were almost completely absent
from any funding arrangements. Most
of these start-ups were solely owned, or
partnerships with spouses and long-term
partners.
Without a more proactive capital market
that recognises the promise of female entrepreneurs
(whatever their age), Australia’s
international business performance will be
constrained.
THIS ARTICLE WAS FIRST PUBLISHED AT WWW.THECONVERSATION.COM.AU
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