Yes, the gender gap remains in the usual places for women. They get less pay, need career pauses with time out for children and other dependents yielding lower savings for retirement. Despite facing challenges, women are gaining ground. They are reaching higher corporate levels and increasingly starting their own businesses.
According to an American Express 2018 report the number of women-owned businesses has grown 58% from 2007-2018. That is more than four times the 12% rate for all businesses in the US.
Self-made female entrepreneurs, numbering just under 13,000, have achieved ultra high net worth according to a 2018 Wealth X report. They account for a record share of 13.7% of Wealth X’s group.
There are 14.6 million women-owned businesses generating over $1.7 trillion in revenues. These businesses account for 8% of all private sector employees and 4.3% of revenues.
Female Business Start-Ups Outpacing National Rate
High growth entrepreneurship has rebounded from the slump of the great recession but overall growth is still in a decline. Women’s business ownership however, has bucked that trend with significant gains. Women-owned businesses are growing faster in numbers, employment and revenues as compared to total businesses.
With these strides towards success, women entrepreneurs need to overcome these 4 challenges:
- Securing Capital For Their Growing Businesses
- Strengthen Negotiation Skills
- Need for A Strong Support System
- Work/Life Balance
1. Securing Capital For Growing Businesses
Women entrepreneurs face greater difficulties than men when raising capital to fund their growing concerns. They receive a miniscule fraction from a largely male-dominated investor pool.
As reported by the National Association of Women Business Owners (NAWBO) Public Policy Survey, 65% of their members considered access to capital to be a very or extremely important issue.
When women can’t get the needed capital from angel investors, Venture Capital (VC) firms or bank loans, their companies are less able to expand, hampering growth potential. It impacts their ability to hire employees, get supplies and office space.
Regarding types of financing, 63% of the NAWBO members used credit cards, 13% used a commercial or bank loan, and 11% used a personal bank loan. A study by Wells Fargo and the Center for Women’s Business Research similarly points to lower access to loans for women business owners versus those owned by men.
Venture Funds Largely Go To Male Founders
Only 2.2% of venture capital (VC) funding is received by women-owned businesses, with the vast majority of VC capital (79%) going to male-owned businesses according to Pitchbook’s VC database. The rest go to businesses owned by both sexes.
Higher VC investments (about 20%) were received by founding teams with a female entrepreneur in 2018. Pitchbook has also pointed out that female-run businesses, whether founded or co-founded, in certain niches, like e-commerce, tend to receive more VC investments.
Women account for only 7% of those investing partners among the top VC firms making decisions. In recent years, more women are being hired as decision-makers at partner levels at VC firms.
First Round Capital reported that female-founded businesses outperformed their male counterparts’ by 63% according to portfolio returns.
Females are far more reliant on personal sources as opposed to external financial sources than males. In 2016, women received 18% from the Small Business Administration’s loan program compared to 67% for men.
How Long Term Gender Bias Hurts Access To Money
Women entrepreneurs and their ability to access funds are playing catch-up to men due to longstanding gender bias against women. As a result, women, in comparison to men:
- have slightly lower credit scores;
- less likely to incorporate their businesses;
- fewer years of industry or start-up experience;
- less likely to access private capital like angel or VC funds;
- have lower approval rates; and
- operate with lower loan approval rates.
Female business owners should seek innovative means of raising capital to fill in the gap left by traditional financing sources.
Crowdfunding Is A Bright Light For Female Owners
One way women owners have been excelling in raising money is through crowdsourcing. This fintech innovation raises cash using online platforms through campaigns that invite people to invest. 47% of successful campaigns on a popular site, Indigogo, were run by women.
Crowdsourcing raised $17.2 billion in 2015 and is proving to be a desirable place for women to raise capital for their ramping businesses. The National Women’s Business Council (NWBC) issued a report, “Crowdfunding As A Source of Capital For Small-Medium Businesses for Women Entrepreneurs.” Among the better known of the crowdsourcing sites is Kickstarter.
What Kickstarter Results Are Promising
NWBC pointed to some impressive results from 2009-2017 data for female entrepreneurs using Kickstarter for funds in its report.
Women’s participation on Kickstarter is holding steady at 30% and show higher success rates than men (9% on average). The higher success rates for women are robust across all project categories.
A Kickstarter project that is shared on Facebook at least 8 times is 34% more likely to succeed. Women tend to do better than men when it comes to social networks.
Female entrepreneurs set lower funding goals at the inception of a campaign. However, they are better at raising funds in excess of their original goals even in male-dominated categories like technology.
Innovative Financing Sources
Crowdfunding shows potential to increase flows of capital in female-led projects that have been stymied by traditional financing sources. Early signs show that this type of funding levels the playing field for women.
A recent PricewaterhouseCoopers global report showed that women raising capital through seed crowdsourcing were more successful than men. 32% of women-led campaigns were funded versus 23% for men.
Equity crowdfunding is relatively new but results look promising for women seeking capital.
Employment in women-owned firms grew 4.5 times more than the national average (ie 18% versus 4%), reflecting importance of women employers for the economy. Women are more likely to get funding by emphasizing their social impact like providing jobs according to a study on gender bias.
To get more funding women need to network more, especially with VC firms with strong representation by women who make investment decisions.
2. Strengthen Negotiation Skills
Women tend to be less assertive and more accommodative than men at the bargaining table. A Carnegie Mellon study by Professor Linda Babcock showed that women are penalized by “the social cost of negotiating.” It has been found that women tend to make better advocates when they represent others rather than themselves.
Prof. Babcock recently started the Carnegie Mellon Leadership and Negotiation Academy For Women.
The Academy can enhance women’s ability to:
- master negotiation skills;
- enhance your unique brand;
- leverage internal networks;
- how to attract sponsorship, and
- learn how to communicate and market your leadership brand.
Being able to negotiate is critical in many aspects of your business, whether closing a deal, obtaining capital, getting better prices from your suppliers or hiring employees.
See our related post: 10 Steps Women Should Take Negotiating Salary Compensation
3. Need A Strong Support System
I was fortunate to have several strong women role models and mentors. Growing up, my mother was a manager of several retail stores soon after arriving to the US. Later on, she started her own housewares business.
While working as an equity analyst in a particularly male-dominated environment, I enjoyed a strong and nurturing female network who served as mentors, providing me with a sounding board and playing a crucial role in my professional development.
Now as a professor, I am called on to give my students help in class, applying for jobs, or when they participate in competitions. I have served as a mentor to business students participating in university-wide entrepreneurial competitions.They were vying for access to funding through grants, sponsorships and professional contacts with major banks.
I find that female students, either as a group or one-to-one, tend to approach me for advice and guidance more readily than their male counterparts. They are more willing to explore new avenues and ask the hard questions.
Networking and Mentoring Are Critical At All Stages
Finding a network and a mentor is important. According to a UPS survey of small business owners, 70% of those receiving some form of mentoring survived five or more years. That is double the rate of those who did not receive that support.
The truth is fewer women have the management experience to lead when starting their own company. According to a Leanin.org and McKinsey report, just 19% of top executives are women. Fewer than 10% of startups are owned by women. Financing groups remain predominately male-oriented.
Networks are important for emotional support. Starting your own company is fraught with stress from constant decision-making. It could be a lonely undertaking. Reach out to someone you believe has the ability to help you, especially if they have launched their own company. Don’t wait for someone to come to you.
Increasingly, there are more groups for women entrepreneurs to turn to for financing, counseling, skills training, one-to-one mentorship, networking, local assistance and resources.
Here are some of the organizations you can turn to:
Small Business Administration (SBA), through its Office of Women’s Business Ownership (OWBO) and SCORE have workshops for women;
Women Igniting the Spirit of Entrepreneur or WISE center is an Entrepreneurship project of the Whitman School of Management at Syracuse;
The Female Founders Alliance is an accelerator for pre-seed companies for women seeking early funding; and
American Express CEO Bootcamp receives high marks for its support program and insightful articles.
Inspirational Stories From Successful Women
Ellevate Network is a global network of professional women provides access to support, community and resources. Sallie Krawcheck is Chair, CEO and co-founder of Ellevate as well CEO, co-founder of Ellevest, a digital investment platform for women.
Krawcheck is one of the few women entrepreneurs to have had a successful career as CEO at major global investment banks and as a start-up CEO. While she may have made the transition to a start-up look easy, she faced similar challenges as other women entrepreneurs do.
However, she has noted that raising money on her own and losing some in the business she was starting up was unduly stressful.
Sara Blakely is founder and CEO of Spanx, a major apparel company for leggings and pants shapewear. She is the youngest female self-made billionaire listed on Forbes. Blakely also was on Time magazine’s “Time 100” annual list of the most influential people in the world. Her story, from days as a fax salesperson to creation of Spanx, is truly inspirational and it happened almost by accident.
Blakely was wearing control top pantyhose under white pants to a party. She didn’t like the look of the seamed foot when wearing open-toed shoes. Masterfully, she decided to cut off the bottom of the hose while retaining the preferable wearing control top for better fitting. However, the pantyhose kept rolling up her legs. She began to research and save money to develop her own hosiery idea.
Initially, she pursued her idea to have hosiery companies design her idea but was turned down by many (mostly males) who didn’t see the value of her revolutionary concept. Presumably, they never wore hosiery or bought the product they were marketing.
Ultimately, Blakely found huge success with help from others, including Oprah, and her own perseverance. Her success was not without overcoming her own self doubt along the way and negative fears she needed to conquer. Spanx by Sara Blakely Foundation provides financing, mentorship, and support for women, particularly of color.
4. Work/Life Balance
Working women executives, suffering from work/life balance issues often consider starting up their own businesses as an anecdote. A PayPal study found that 55% of American women started or wanted to start their own business to achieve a better schedule for themselves. Women seek flexibility and are more likely to work out of their homes.
However, becoming a CEO of your own company is not a walk in the park.
A survey by Harvard Business Review examined data about CEOs’ use of time. They worked nearly 10 hours per weekday, conducted business 79% of their weekends, and 70% of their vacation days.
Entrepreneurial activities like raising capital, hiring people and developing your strategic vision are demanding, time-consuming and stressful. It is easy to see how work/life balance could be fleeting for women starting up their own companies. They still have to balance societal expectations for them in dealing with family responsibilities.
The role of women entrepreneur is a relatively new one and presents greater conflicts to resolve.
Related Post: Pros And Cons of Self Employment
Women Truly Have The Greater Balancing Act
Women still tend to shoulder more work related to the household and child-rearing, even among couples who set out to share the workload equally.
A recent study from Ohio State University found that on nonworkdays, fathers engaged in leisure 47% of the time as compared to 19% for women who spent more of their time doing household chores. These statistics are for highly educated couples where both partners qualify as breadwinners.
Need A Supportive Partner At Home
True, men are increasing taking part in domestic help and sharing in childcare. I am blessed with a husband that has been tremendously supportive and plays an equal part (if not more, at times) in family responsibilities while working full-time as an attorney.
Women entrepreneurs need to prioritize what is important in their dual roles at work and home. You can’t handle everything especially by yourself. Women need to get external help like cooking meals for kids and cleaning the house. They also need to delegate assignments to others in the office.
Women entrepreneurs have made significant strides in owning their business and their successes. They have several challenges to overcome before the playing field is fully level. Their progress is need for fund raising, at the bargaining table, having strong support and work/life balance.
Gender barriers exist but tenacity and increased momentum by successful women entrepreneurs will pave the way.
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Women And Money: 7 Steps To Control Your Finances
Have you started your own business or thinking of doing so? What challenges have concerned you? Share your comments with us. We would like hear from you!
With a passion for investing and personal finance, I began The Cents of Money to help and teach others. My experience as an equity analyst, professor, and mom provide me with unique insights about money and wealth creation and a desire to share with you.