Dec
26

Is Female Entrepreneurship Fairly Represented in the Startup Community?

This is a difficult question to answer with any degree of certainty. Here are some interesting facts to absorb before forming an opinion. American women own 10.6 million businesses in the United States, employing 19.1 million (one in seven) workers. The businesses women own rack up $2.5 trillion in annual revenue.

While impressive, it is less than conclusive evidence that women are fairly, or better yet, proportionately represented in the startup community.

More Facts

There are almost 28 million small businesses (businesses employing less than 500 people) in the United States. Is it a certainty that women own 38% these businesses? Not really, but this is very likely an accurate percentage—with a +/- 3% margin of error. In fact, according to a study conducted by the International Finance Corporation, women own more than one-third of all the businesses on the planet! Can all these women owned businesses be classified as startups?

Certainly not! About all we can say with certainty is that about 38% of all businesses in the United States are owned by women and about 62% are owned by men.

Sadly, we don’t have any reliable statistics on the startup community. Most available data on the subject is gleaned from venture capital firms. This would be helpful except for the fact that women are much less inclined to seek venture capital than are men. As a result, men have the apparent lead in startup creation but this is an obvious fiction.

The lopsided statistics result from the fact that men seek venture capital more frequently than women seek it. The statistics are not, therefore, an indictment of venture capital firms and they are not convincing evidence that women face discrimination in the startup community. It is far more likely a matter of women’s preference than any discriminatory practice. Discriminatory lending is, after all, illegal under H.R. 5050.

Meaningful Analysis

Clearly, quantifying the status of women in the startup community is hindered greatly by the personal choices they make with respect to funding. Women, it would seem, appear to be more inclined to bootstrap, seek funding from family and friends, or simply make do with the resources at hand.

Revisiting the earlier fact that women own 10.6 million businesses employing 19.1 million people, we see rather quickly that women owned business average less than 2 employees each. We can make a reasonable assumption that the businesses women own are typically quite small and the women are very likely working alone in the business with perhaps one or two employees.

Many women are funding their startups through factoring companies like CBAC Funding, invoice financing, friends and family or other clever ploys, which does not explain the fact that the majority of women owned businesses remain really, really small.

This does not necessarily mean that their businesses are not scalable. However, it does mean that many women are passing up the opportunity to grow their businesses by opting out of venture capital.

Parting Thoughts

Are women really making a conscious choice against accepting venture capital? In my view this is highly unlikely. Rather, I believe it is a combination of two major factors.

First, many women simply lack exposure to venture capital. They have little understanding of what it can mean in the context of their enterprise and

Second, if they do have an interest in and understanding of the impact venture capital could impart to their enterprise, they are psychologically predisposed to dismiss any thoughts of pursuing it because of the media induced assumption that as women they will have almost no chance of obtaining VC funding.

It is probable that women entrepreneurs could benefit from a greater understanding of the role venture capital plays in growing a business. Perhaps more women with scalable startups would seek venture capital if the efforts to convince them that they will be discriminated against were scaled back. There is absolutely nothing based in fact to support that accusation.

It would be far more productive for the bloggers, talking heads and the authors of sensational headlines to shift their focus to educating women entrepreneurs in the benefits of venture capital, how and when to seek it and what is expected of them when they do.

There were significant increases in women owned businesses subsequent to the passage of the Women Business Owner’s Act in 1988. It is not unreasonable to hypothesize that greater increases are achievable, if not through legislation, through increased involvement in the education of women by the Women’s Business Center, already established under the 1988 Act.Studies confirm that women who have had some type of enterprise training are more likely, by a factor of 2, to engage in entrepreneurial ventures than those who have had no such training.

Women owned businesses are increasing at twice the rate of all United States businesses. Imagine the economic clout this will give female entrepreneurs.

 

About the Author:

Dipti Parmar, a digital marketing wiz is associated with E2M Solutions. She’s been journeying through the world of digital marketing for 6 years and is a blogger and networker. She’s also a movie buff and loves taking long walks by the seashore. She is @dipTparmar

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