How successful women entrepreneurs can pay it forward, balance the scales, and drive the economy.
According to the U.S. Census Bureau, there are roughly 9.9 million women-owned firms in the United States, representing over a third of all firms in the country—and the ranks of new enterprises with women at the helm are growing rapidly. Between 2007 and 2012, women-owned firms in our country grew by 27 percent compared to a growth rate of 2 percent for firms overall. But in spite of their impressive growth in numbers, the business ventures women are launching today continue to lag behind those launched by men in terms of revenues and employment. So while an increasing number of women can count themselves as entrepreneurs, many appear to be running into barriers, as the vast majority of their businesses remain quite small.
What’s holding women back? What’s capping their businesses?
What’s holding women back? What’s capping their businesses? A crucial pitfall is that women face unique challenges in their attempts to acquire financial capital. Growth-oriented firms typically require substantial investment—both in the form of bank loans and external equity in the form of angel or venture capital funding—to scale up. Meanwhile, a number of studies reveal that women entrepreneurs raise significantly smaller amounts of capital than men and face continued barriers in their attempts to secure external equity in particular.
Some evidence indicates that equity investors are more inclined to invest in people like them and, traditionally, the vast majority of angel investors and venture capitalists have been male with few women in leadership or decision-making roles. The research findings bear out when you talk to women entrepreneurs: Women business leaders I’ve interviewed along with my colleague Alicia Robb, have shared how difficult it was to gain access to angel and VC networks or to have their firms, and often themselves, taken seriously. In reference to her own attempts to raise venture capital, Jules Pieri, co-founder and CEO of the Daily Grommet online marketplace, had this to say:
It often feels like a 1969 office scene when you visit a VC in their native environment. The offices are swish and modern, but the workforce looks like the cast from Mad Men, diversity-wise. The only women you moving along the corridors are serving admin roles (i.e. coffee) or are 26-year-old associates who are just passing through. One VC I visited made me seriously question my ambition to fund a startup. He was friendly enough. But the office walls were covered with endless pictures of all-male startup teams, and after hearing my pitch he asked, with a vapid grin, “So, do you work out of your home?” I had 15 employees. I had impressive angel investors backing me. This was my third startup experience. Seriously? Did I work out of my HOME?
I’d like to say that we can break the logjam that’s holding back women entrepreneurs by changing hearts and minds. And, that’s part of why Alicia and I have written A Rising Tide, and now, The Next Wave. What we’ve found is that there are three essential factors that women entrepreneurs need to thrive: knowledge, networks, and investors. In tandem, these three ingredients connect and empower emerging entrepreneurs with those who have succeeded in growing their firms while also realizing the financial and economic returns that come with doing so.
Knowledge gleaned from the experiences of other business leaders is a critical resource for aspiring women entrepreneurs.
There is no users’ manual for the entrepreneurial process, so knowledge gleaned from the experiences of other business leaders is a critical resource for aspiring women entrepreneurs. Being able to interact with other successful entrepreneurs who have “made it” helps them understand the stages of the entrepreneurial process as well as key resource inputs and tasks at each stage, including the importance of and pathways to securing financial capital. Experienced entrepreneurs can also provide perspective on the inevitable ups and downs that accompany any venture. In this sense, other entrepreneurs serve not only as a source of information and guidance, but also as role models and mentors, as well as potential conduits to broader networks of support. Women who have made it have companies to run, but many also step into this support role for others climbing up the rungs.
But, these individual entrepreneurs are only part of the networks that empower enterprising women. Organizations that specifically target the needs and challenges of growth-oriented women entrepreneurs, especially women’s exclusion from angel and venture capital networks, are another piece of the puzzle. As examples, both Astia and Springboard Enterprises offer training for women entrepreneurs and provide valuable connections with angels and VCs. To date, over 600 women-led companies have participated in Springboard’s accelerator programs for growth-oriented entrepreneurs and collectively, these women have raised $7.2 billion, creating tens of thousands of new jobs in the process.
Last, but certainly not least, investors who have the financial means and desire to invest in women-owned firms are growing in number. Still, we have a long way to go. According to IRS data, women represent over 40 percent of top wealth holders in the United States, yet estimates from the University of New Hampshire’s Center for Venture Research indicate that they represented only 25 percent of angel investors in 2015. In response to the low representation of women in angel investing, however, a growing number of organizations—like Golden Seeds, 37 Angels, Pipeline Angels, Astia Angels, and Next Wave Ventures (founded by my colleague, Alicia Robb) are mobilizing women with capital in ways that benefit women entrepreneurs. Collectively, these groups aspire to increase the number of women at the helm of business by going around the traditional infrastructure; many of them are successful entrepreneurs who are ready, willing, and able to invest in growth-oriented women-owned firms and change our business landscape more quickly by doing so.
Successful women entrepreneurs who are paying it forward in a variety of ways are a driving force behind what Alicia and I see as the next wave. In a virtuous cycle, women entrepreneurs evolve from being the recipients of human, social, and financial capital into becoming the providers of those key resources as their firms grow and create economic value. The more successful women at the helm of businesses that kick off cash, the more women there are to invest in others, and the faster we see the number of women grow in the ranks of larger businesses and investing. Considering the fictionalized world of HBO’s Silicon Valley, there are far to few Monicas and Laurie Breams behind influential desks. But, thanks to the next wave, there will soon be many more.