Rep. Chu Hosts Hearing in Pasadena on Increasing Access to Venture Capital for Women Entrepreneurs

PASADENA, CA – Today, Rep. Judy Chu, the Ranking Member of the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access, hosted a hearing in her district at the Pasadena City Hall to examine the challenges faced by female entrepreneurs looking to obtain venture capital. Rep. Chu was joined by Rep. Steve Knight (CA-25), who chaired the hearing. They heard testimony from four local female venture capitalists and entrepreneurs about trends in the industry and difficulties faced in obtaining venture capital. According to a recent study by the Kauffman Foundation, 72% of women entrepreneurs listed access to capital as their most critical challenge to launching a new business. At today’s hearing, Rep. Chu made the following remarks:

“Although women-owned firms have made significant gains since the recession, they still lack in access to capital compared to their male-owned competitors. That is why I am proud to be hosting today’s hearing on the challenges faced by female entrepreneurs looking to obtain venture capital, and what solutions are available.

“There is no doubt that women-owned small businesses are an undeniable force in today’s economy. Over 9.8 million women-owned businesses, employing 8.4 million people, generate $1.4 trillion in annual earnings. Here in California, over 37 percent of businesses are women-owned, the most of any state in the country. These female entrepreneurs employ over 1 million Californians and generate $200 billion in receipts. And their growth is out-pacing other businesses as well. From 2007 to 2012, the number of women-owned businesses grew 28 percent versus just 8 percent for male-owned firms. Yet despite these numbers, women-owned businesses still face one key obstacle to success – access to capital.

“Startups, which typically lack revenue streams and credit history, depend on venture capital to succeed. But access to capital is precisely where women business owners are struggling the most. According to a Babson College study, businesses that have all-men teams are more than four times as likely as companies with even one woman on the team to receive funding from venture capital investors. And companies that had a woman CEO only received a total of 3% of investments, despite findings that businesses with a woman on the executive team are more likely to have higher valuations at both the first and last stage of funding.

“As a result, women business owners are more likely to have to rely on personal credit cards, their own savings, and capital provided by friends and families in order to finance their businesses. This disparity is problematic and unfair. Fortunately, investments through the Small Business Investment Company (SBIC) program, operated through the Small Business Administration, can help. SBICs have made 280 investments in women-owned firms totaling $394.6 million over the past 5 years. More importantly, there has been a significant increase in such investments over the past two years - the number of investments has doubled and dollars increased four-fold. Unfortunately, these investments in women owned firms still only represent approximately 3 percent of the overall activity of the SBIC industry.

“I know we can do better. Not only to encourage more businesses and jobs in our economy, but to close the gap that is unfairly hurting women entrepreneurs. Because I know that when women succeed, America succeeds.”

Witnesses for this hearing included Jeri Harman, Managing Partner & CEO, Avante Mezzanine Partners, representing the Small Business Investor Alliance (SBIA), Renee LaBran, General Partner at Rustic Canyon / Fontis Partners , Louise Wannier, Board Member at True Roses, Inc., and Laura Yamanaka, President, teamCFO, Inc., representing the National Women’s Business Council. Further details on this hearing are accessible through the House Small Business Committee, found here.