Shuyin Tang, co-founder and CEO of the Beacon Fund, a private debt fund that focuses on backing women-owned and women-led businesses, and Nicole Denholder, founder of Next Chapter Ventures, a funding ecosystem for female founders, speak about the different pathways to funding and redefining success
Nicole Denholder is on a mission to drive more money to women, both as founder of Next Chapter Ventures, which empowers female entrepreneurs to reach their potential and get funded faster, and as co-founder of Sophia, a learning platform delivering financial education to women.
Shuyin Tang, who has a background in impact investing, has felt a similar calling. “For a while I wasn’t aware of the challenges [faced by] female entrepreneurs. But the higher I rose, the [more those] barriers became clearer. How do we close the gender finance gap? How do we provide more pathways [to funding] for female entrepreneurs?”
When it comes to the gender finance gap—the difference between women’s and men’s access to financial services, resources and opportunities—a figure widely touted is that less than 3 per cent of funding goes to female entrepreneurs. It’s a figure that refers specifically to venture capital-backed (VC) funding.
“It’s definitely a huge problem,” says Tang. “But VC funding is actually for a very small proportion of companies. Is the goal only to get more VC funding to female entrepreneurs? That’s a very specific goal. I think the more interesting questions are: what types of businesses are out there, what type of funding do they need and how do we get them that funding?
“Many great businesses are destroyed or pushed down the wrong path because they feel VC funding is the only way. They try and [incorporate] tech, and scale, and burn through a lot of cash, when at the beginning they were a profitable, sustainable business. VC funding is only one tool, and it’s being used as the yardstick or solution for a number of enterprises which are vastly different.”
“VC is not the only way,” agrees Denholder. “It could be [appropriate], but if you are not going to meet the metrics of fundraising ... there are different ways to access external financing.”
Denholder’s Next Chapter began with a crowdfunding platform, offering female founders an alternative to VC funding, and now provides education and networking to female entrepreneurs, and helps them to identify appropriate financing models. She also focuses on increasing women’s commercial and investment literacy, so they can develop a clearer understanding of the options available to them in order to make better business decisions.
Tang’s exploration of alternative financing models for women-owned and women-led businesses caused her to found the Beacon Fund, which offers debt financing to target more established, cash-flow-positive businesses.
"The beauty of debt [financing] is that after its lifetime, you can walk away and you’ve had a successful partnership. You’ve taken that capital, invested it, used it to grow your business, and at the end of the timeframe, there are no more expectations from the investor"
“People don’t have much awareness of how debt financing can grow a business,” says Tang. “For us, it’s very simple—if you generate profits and cash flow, then you should be able to take on a certain amount of debt and manage it well. And the beauty of debt is that after its lifetime, you can walk away and you’ve had a successful partnership. You’ve taken that capital, invested it, used it to grow your business, and at the end of the timeframe, there are no more expectations from the investor. It’s an attractive proposition that people don’t always see. Equity is the most expensive form of capital. A common misconception of a VC-backed business that I think Nicole and I have heard many times is that equity is free—you don’t have to pay it back—and debt is bad because you have to pay it back. No! If you truly believe in the potential of your business, then equity is much more expensive than debt.”
As well as offering female entrepreneurs an alternative funding model, Tang wants to drive a change in the narrative around success.
“There are different definitions of what it means to be a successful entrepreneur, and the media does focus on VC and raising lots of money; that’s often the definition of success for an entrepreneur. We are trying to broaden people’s perspectives,” she says.
Adds Denholder: “A lot of businesses feel devalued if they don’t take on or try for VC [funding]. [They ask] how do I build in tech so I’m more interesting to a VC? Women feel a sense of failure because they haven’t raised capital in the first three years. [VC] owns a lot of the narrative in the ecosystem. But also, a lot of women don’t measure success just financially. They are looking at the purpose behind their business.”
VC funding is not right for every business, and in particular is often not right for female-founded businesses.
“We notice that many women are not as comfortable with some of the intrinsic values of VC which is about going big or going home, blitzscaling, pushing up your valuation in successive funding rounds,” says Tang. “Many of the female entrepreneurs we spoke to were more comfortable with moderate growth. And as a result, VCs weren’t interested. [These women] are being told, ‘You’re not ambitious enough’ or ‘You’re not taking enough risk to scale your business’. But they are just being prudent.”
Comments Denholder: “A lot of women we talk to like to have a sense of control and they feel that if they pursue VC funding, there’s a sense that someone is going to come in and dictate what the business is doing and dictate its growth. [They] don’t want to feel that loss of ownership.”
“The narrative is so dominated by one way,” says Tang. “Our name is Beacon. We want to shine a light on female entrepreneurs who are overlooked, but also shine a light on a different model of being a successful entrepreneur.”