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Female Founders: Tips for Infusing Capital into Your Dreams

jan-paul-ferrer

By: Jan Paul Ferrer

 

Today, women own four out of every 10 businesses in the U.S.1 In 2018, women of color accounted for 47 percent of all women-owned businesses.1

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:

1. To have more fl exibility. In one survey, nearly three-quarters of women prioritized fl exibility over money.2

2. 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.3

3. To have more control over their future.2 Entrepreneurship may give women more fl exibility in balancing their personal and professional commitments.

4. To advance more quickly. Although women are just as likely as men to want a promotion, women are 15% less likely to get promoted.4

Bridging the Funding Gap

It’s no surprise that funding is a critical component of business success. Unfortunately, female founders have a more diffi cult time securing funding than their male counterparts.5 The fi rst 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 fi nance 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 affl uent 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 fi rms 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 fi nd 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 fi nancial advisor can help you determine which avenues may be best for you..

Disclosure:

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor. Jan Paul C. Ferrer is a Financial Advisor in Chicago, IL at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at janpaul.ferrer@ morganstanley.com or by telephone at 312 312-419-3535 Morgan Stanley Smith Barney LLC is not implying an affi liation, sponsorship, endorsement with/of the third party or that any monitoring is being done by Morgan Stanley Smith Barney LLC (“Morgan Stanley”) of any information contained within the website. Morgan Stanley is not responsible for the information contained on the third party website or the use of or inability to use such site. Nor do we guarantee their accuracy or completeness. Jan Paul C. Ferrer.may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where [he/she] is registered or excluded or exempted from registration, https://advisor.morganstanley. com/janpaul.ferrer ©2020 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 3033944 05/2020 References: 1. American Express. 2018 State of Women-Owned Businesses. 2. Forbes. Why More Women Are Turning to Entrepreneurship, February 4, 2019. 3. AAUW. The Simple Truth about the Gender Pay Gap. Available at https://www.aauw.org/ research/the-simple-truth-about-thegender- pay-gap/. 4. LeanIn.org and McKinsey & Co. Women in the Workplace 2018. 5. Harvard Business Review. We Recorded VCs’ Conversations and Analyzed How Differently They Talk About Female Entrepreneurs.

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