So far, this series has focused squarely on the stats around venture funding for women-led startups – the amount of venture capital (more accurately, the lack thereof) that lands in the pockets of women founders.

But venture capital is just one way to fund a startup. For many — most, even — it’s not the right way.

Add in the rather depressing funding stats for women-led startups, and all the systemic challenges, cultural barriers and conscious and unconscious bias, and this path, in particular, starts to look pretty unattractive.

All the data suggests that women trying to raise venture capital (VC) face an uphill battle. So, do they need to raise at all?

Bill Trestrail is a serial entrepreneur and a long-time startup mentor and advisor. He is also a board member of SBE Australia, helping to support women entrepreneurs as they grow their businesses — and fund them.

Anecdotally, he believes women are more likely to explore other avenues for funding their businesses.

Despite the industry focus on VC funding, it’s “a small part of the picture,” Bill says.

“There’s a huge range of other investor types — family offices, high net worth individuals and strategic investors, for example. I don’t know how we would measure the numbers for women entrepreneurs in those spaces.”

The VC model is to find and back unicorns; the companies that are going to achieve a $1 billion exit and 100x returns. But that isn’t the only measure of success.

“There are a whole lot of great businesses that would never be unicorns, and that would never scale to a point to get VCs interested,” Bill says.

“For them, there are certainly lots of other sources of funding.”

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Alternative funding options

Venture funding is a form of equity capital, whereby a founder effectively sells a percentage of their business to an investor, on the expectation that this portion will be worth more in the future.

The VC model is high-risk, high-return. Nine out of ten investments might fail, or return very little on the investment. The tenth, however, makes up for them all, plus some.

Individual angel investors and syndicate groups also provide equity funding, but will likely be comfortable with more steady, long-term growth and a more modest return. 

Family offices, too, invest on behalf of super high-net-worth folk, and often focus on a specific sector, or back startups making an impact in particular areas. Often, investments are more about the mandate than fast return on investment.

Equity crowdfunding, through platforms like Birchal or Equitise, allows businesses to effectively offer shares to a large number of investors, opening up investment opportunities to more people, and often allowing customers to come on board as investors.

Many startups also get off the ground with early funding from friends and family, often (but not always) on an equity basis.

Elsewhere, there are multiple grant programs available to early-stage startups. These can be competitive, are often dependent on location or sector, and generally require an onerous application process. Funding is also usually tied to a specific project or program, locking the business into a particular deliverable. 

Other government funding schemes, such as the R&D Tax Incentive, are accessible to any business that meets the qualification criteria and can offer significant support in funding research.

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What about debt?

Of course, Tractor Ventures deals in debt. This funding is designed to be non-dilutive; offering a way for founders to secure funding while retaining ownership, and without requiring security or collateral.

While we often consider bank funding to be inaccessible to startups, Tractor co-founder and CEO Jodie Imam says it’s not unheard of for tech companies to access a line of credit or overdraft facility from a bank.

“Those are valid options if your business is strong enough to support bank credit criteria,” she says.

However, debt funding from Tractor (or from competitors such as Lighter Capital and Mighty Partners) is specifically designed to suit startups and tech companies — companies that have IP and revenue, but not necessarily the physical assets that would be deemed valuable by a more traditional institution.

Debt, Jodie stresses, is not the be-all and end-all. It’s not the right answer for every startup at every stage.

What it is good for is supporting growth activities — sales and marketing, for example — that will ultimately generate revenue.

Debt is usually a short-term solution for short-term growth, she explains, whereas equity is better suited to longer-term investments.

“When a startup is ready, we will advise as to whether we think equity investment is best,” she says.

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Changing the narrative

With that said, this is still a relatively young ecosystem, and Jodie says the narrative that has emerged is that to achieve growth, startups need VC capital.

“Every single accelerator or incubator program you go to, that’s the playbook they give you,” she says.

“Today, part of my job is rewriting that playbook.”

Jodie is speaking from experience. When building her first business, she didn’t initially realise that in building a marketplace, she was building a tech startup. 

Once she started learning more about this space, she found her peers were raising venture capital, and concluded that she should be doing the same.

Perhaps at the time, this was an accurate assessment. But today, Jodie says the ecosystem is more mature, and there are more options available to all founders.

“We’ve been going for four years, and some of our competitors were in the market a year or two earlier,” Jodie says. 

“Before that, the ecosystem was too small to support a range of capital options. Now it’s grown to this size, there is enough scope for players like us to exist,” she adds.

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The funding landscape for women

For women and other under-represented or marginalised founders, the alternatives to VC funding are arguably less affected by bias — conscious and unconscious.

The relationship between founder and VC investor is often likened to a marriage: it’s long-term, and should be based on trust, understanding, mutual values and shared goals. So it’s not surprising, or necessarily inappropriate, that investors want to feel an affinity with the founder and the product they’re backing. They want to ‘click’.

The problem is that it is easier to find that ‘click’ with people of a similar background to you; people with whom you share clear commonalities, or who are solving challenges you have experienced.

When the majority of investors are men, this puts women at an obvious disadvantage — more so if they’re solving women-centric problems. But it also risks excluding people of colour, those with English as a second language, neurodivergent people, and those simply afflicted with awkwardness under pressure.

Things like grant funding, on the other hand, tend to be judged on the strength of the application and whether requirements for the funding are met, rather than on personality, charisma or ‘vibe’.

As Tractor co-founder Aprill Enright explains, applications for Tractor’s debt funding are also designed to remove bias.

“In our credit assessment, we’re just looking at the numbers through hooking up to your Xero or whatever your accounting platform is,” she says.

“That’s where we start, purely on numbers and the intended use of funds. There isn’t much of a component of that subjective feeling, or what the ‘vibes’ are like.”

However, systemic challenges remain. Grants often require matched funding, meaning women founders may still have to run the gauntlet of VC.

One of the key barriers to women raising VC is that they’re less likely to have the kinds of friends and family networks to provide early investment. Even if they do, societal pressures and conditioning mean they’re less likely to approach those connections for funding.

Equity crowdfunding, in particular, is often hailed as a way to democratise investment, opening up opportunities to a wider pool of retail investors, and offering a more feasible avenue to funding for women entrepreneurs.

In 2023, 31% of the total invested through crowdfunding in Australia went to startups with at least one woman founder, and 8.6% (through nine deals) went to startups with all-women founding teams.

While these stats are a little less dismal than the VC equivalent, they still point to a space dominated by male-led companies.

A Birchal spokesperson says the company doesn’t directly track the gender of investors. However, based on names alone, they believe women’s investment in Birchal campaigns “has been consistently at 40% or more”.

“I often wonder how many women investors are on those platforms,” Jodie muses.

“Women don’t have as much super, we don’t have as much savings, we don’t have as much salary.

“It comes back to the same one thing we can do in our ecosystem to make the most immediate change — and that is to get more women making investment decisions.

“That is by far the quickest way we can start to turn our pipeline around.”

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Why fight a losing battle?

As the Australian ecosystem matures, for many companies, VC is no longer the only option. As both Jodie and Aprill admit, neither is debt.

But for women weighing up their options, VC is looking less and less appealing. 

On the one hand, if women aren’t seeking funding, then we can’t start turning the stats around. On the other hand, it’s not incumbent on women to make that happen.

If they can achieve the outcomes they want without attempting the VC gauntlet, who is going to begrudge them that? In fact, it’s probably a sound business decision.

"Raising VC is 'a full-time job'," Jodie says.

“Even more so if you’re a woman. You’ve got more battles to fight.”

Bill’s advice for all startups, woman-led or otherwise, is to steer clear of any investment whatsoever, for as long as possible.

“My advice is always to try to build a sustainable business model and get further into it using customer money as opposed to investor money, and proving the sustainability of the business model,” he says.

But his observation is that women, in particular, are loathe to spend their time on activities unlikely to glean results.

“If you’re a busy mum with a partner, and trying to get a startup going, you’re not going to waste your time on anything unless you know it’s going to get a return,” he says.

“There’s a difference in the way you’re going to manage your time and your risk, because of constraints on your time — and constraints on your energy.”

Exactly where women put that precious time and energy will be different depending on the business or the founder, Bill says.

“It’s recognition of what’s important. You’re only going to put time and effort into what’s important and what will get you where you need to go.”