We are living in a golden era of women entrepreneurs. Women are launching businesses at a faster rate than ever before in history, outpacing men by 114 percent.
According to the latest American Express State of Women-Owned Businesses Report, the number of women-owned businesses (WBEs) increased from 402,000 (4.6 percent of all firms) in 1972 to 12.3 million (40 percent of all firms) in 2018. Employment surged from 230,000 to 9.2 million. Revenues rose from $8.1 billion (representing 0.3 percent of all firms’ revenue) in 1972 to $1.8 trillion (4.3 percent of total firms’ revenue) in 2018.
More recently, compared to pre-Recession 2007, the number of women-owned businesses increased 58 percent, while all businesses increased only 12 percent; total employment by women-owned businesses rose 21 percent, while for all businesses it declined 0.8 percent; and total revenue of women-owned businesses jumped 46 percent, while revenue for all businesses increased 36 percent.
In other words, our economy is recovering from the 2008 economic collapse in a large part thanks to women entrepreneurs.
This growth is impressive and worth celebrating, but WBEs are still in the minority—they make up less than half of the total businesses in the United States and most have no employees and lower revenues than male-owned businesses.
We know that representation and diversity in business lead to economic equality and a stronger supply chain, so what can we do to encourage women entrepreneurs to launch new businesses and support established WBEs?
After all, starting a business is the easy part; building the enterprise into a sustainable, successful firm that contributes to the economy and creates jobs is the real challenge. We must ensure that the resources and opportunities these women entrepreneurs need are available, accessible, and effective.
Access to Funding
Every article discussing the challenges WBEs face mentions access to funding as a major hurdle, but few dig into when and how these hurdles were and are erected in the first place or offer solutions for dismantling them. Let's get a little uncomfortable and do both.
Business operates in an odd dichotomy of relying on the status quo and requiring innovation to survive. We know that supplier diversity can strengthen our businesses and increase our competitive edge, but we also see over and over again how the status quo balks at allowing the disruption needed to achieve innovation. Often, our status quo systems and ways of thinking are so ingrained, so subconscious and automatic, that we don't recognize them as obstacles to diversity.
In a 2017 TEDx Talk, Columbia Business School doctoral fellow Dana Kanze shared findings from her research into implicit gender bias in start-up funding. As an entrepreneur herself, she found that potential investors asked her different questions than they asked her male co-founder. While he was asked about what could go right, she was asked what could go wrong.
After leaving her start-up and entering the Ph.D. program at Columbia, Kanze decided to study this phenomenon. She discovered that despite women owning nearly 40 percent of businesses in the United States, they receive just two percent of venture funding.
Searching for an explanation of this enormous funding gap, Kanze compiled data from 2,000 questions and answers during investment discovery sessions. She found that when meeting with investors, 66 percent of women entrepreneurs were asked prevention questions (i.e., how will you retain customers, how will you prevent losses), whereas 67 percent of their male counterparts were asked promotion questions (i.e., how will you acquire customers, how will you increase market share).
“The very first thing I found is that there's no difference in the way the entrepreneurs presented their companies,” Kanze said. Instead, it was the angel investors and venture capitalists asking the questions who displayed implicit gender bias. In addition, both male and female investors were equally biased when asking questions.
Why does this matter? Because the difference in types of questions asked directly correlated to the amount of money raised, Kanze said. The start-ups whose (mostly male) founders were asked promotion questions raised 700 percent more than their (mostly female) counterparts who were asked prevention questions.
We can change these outcomes, however. Kanze researched further and found that if an entrepreneur was asked a prevention question and reframed the answer to be promotion-based, to focus on growth potential instead of projected losses, then they raised 14 times more funding than those who didn't.
Teaching women entrepreneurs how to recognize prevention questions and switch to promotion-focused responses can significantly change the outcome of funding endeavors. Can you add this type of training to your supplier development program? Perhaps your company could advocate for—and help fund—this education at your local women's business council or chamber of commerce.
The burden to fix this problem shouldn't fall solely on women, of course. Investors must learn to recognize their own unconscious biases and shift the types of questions they ask female entrepreneurs. Do you have connections within VC and angel investing? How can you help raise awareness and encourage change? (Forwarding that TEDx Talk video could be a start!)
Access to Networks
We know that personal networks can have a huge impact on our professional success. When we exclude communities, we erect barriers to their success. In a pair of 2018 reports issued by the National Women's Business Council studying crowdfunding by women business owners and entrepreneurs, the importance of a network ranked among the top determiners of success.
“Network size matters, but how it is leveraged is more important,” the study said. “Social networking provides women entrepreneurs interested in crowdfunding with a unique opportunity to share their projects and ideas with their networks, interact with them, receive their feedback, and most importantly, leverage their networks to promote their projects.”
In Idaho, women business owners took matters into their own hands. In January 2018, Brianne Sloan, owner of Paper Flowers Photography in Pocatello, launched the Women’s Networking Group of Southeast Idaho as a means for WBEs to build a community and expand their networking circles. In less than a year, the group has grown to nearly 400 members.
In an interview with the Idaho State Journal, Sloan said she wants to highlight local businesswomen and give them a space to showcase their talents and their voices: “Our main goal is to make sure women feel comfortable, that they have a tribe and a network to be around if they need it.”
How inclusive is your network? When your company attends conferences, local chamber events, or other networking opportunities, are you and your colleagues seeking out women entrepreneurs with a goal of helping them build their own networks?
Access to Opportunity
If women are going to have the same opportunities in business as men, then institutionalized barriers and obstacles must be dismantled. Access to capital and supplier contract opportunities must not only be open but women must also be made to feel welcome to apply and bid. This requires a shift in thinking, a move away from the status quo and toward inclusion.
Women Impacting Public Policy (WIPP) is at the forefront of this effort on the federal level, lobbying the federal government to be more inclusive and welcoming to WBEs. The organization's 2018 Economic Blueprint outlines a “bold, comprehensive set of public policy expectations on behalf of the women business owner community.” This comprehensive blueprint covers a range of topics, including investing in WBEs through lending and business assistance programs and centers, addressing the pay gap, and working with businesses to prepare the workforce for the changing needs of the economy, beginning with early childhood education.
Organizations like the Women's Business Enterprise National Council (WBENC) and the National Women's Business Council (NWBC) also champion WBEs. For decades, WBENC and NWBC have provided resources to help women learn and grow as business owners, facilitated countless connections between suppliers and customers, and been powerful voices advocating for WBEs.
The Women's Business Council - Southwest (WBCS) backs up their education and advocacy with cash through the Lillie Knox Investment Award. Members in good standing can apply for up to $20,000 to be used for capital investments in their businesses. Imagine the impact of that infusion of cash on a small business! Past recipients have used awards to purchase heavy machinery, update the company website and marketing materials, and invest in software to develop a new revenue stream.
How is your firm prioritizing identifying WBEs for potential partnerships? Are you providing and promoting inclusive opportunities for diverse suppliers?
Women entrepreneurs need both external and internal support to succeed. We must ask ourselves how we can be agents of change, advocates for WBEs, breaking down obstacles to success for women entrepreneurs. As we’ve already seen, when working with an uneven playing field, WBEs have a significant impact on our economy. What more could they do on a field of equity and equality?