Female entrepreneurs do a lot of things to get their businesses off the ground. They raid their life savings, take loans, hit up friends and family, and even rely on credit cards. But just one in 100 end up using venture capital. That’s the finding of a new study from Ernst & Young (EY) and the Women Presidents’ Organization (WPO), obtained exclusively by Fortune. The study looks at how 430 women-owned businesses were funded over their lifespan. It includes a mix of young and established companies; just over half (51%) of the businesses surveyed were launched 21 or more years ago.
So, if women aren’t using VC, where is the money coming from? The majority (68%) of those surveyed by EY and WPO say they used personal savings to fund their companies. A bank or line of credit was the second most common response, at 27%. About 22% incurred personal debt, and 18% received a loan from a family member or friend. Meanwhile, a mere 2% or so used private equity, according to the study, which was conducted November 2016 through January of this year. (Participants were permitted to choose more than one response.)While the 1% figure may sound shocking, it actually aligns with what we know about the breakdown of venture capital dollars. Indeed, in 2016, women got just 2.19% of all VC funding. Historically, those numbers have been even worse: Of 6,362 companies that received venture funding from 1991 to 1996, only 31 deals were with women-led ventures, according to a 2001 study for the U.S. Small Business Administration.
More than three-quarters of the entrepreneurs surveyed have generated between $1 million and $20 million in annual revenues, with 14% reporting over $20 million. Venture capital’s funding gender gap is clearly a serious problem, but it’s worth considering that many women consciously choose to avoid VC and private equity money, says Lisa Schiffman, the co-founder of EY’s Entrepreneurial Winning Women program. For some female entrepreneurs, funding their company independently can be a “source of pride”—and perhaps more importantly, a way to remain the primary decision maker in their business, she says.
Sarah Kauss, the CEO of S’well, a popular stainless-steel water bottle manufacturer, is a prime example. Kauss, whose company was a part of the study, used personal funds to grow her business—a decision she says she made in order to “maintain control.” And her choice seems to have paid off: She says the company brought in $100 million in revenue in 2016.
Source : Fortune.com