Given that March is Women’s History Month and March 8 is International Women’s Day, we’re diving into the state of women entrepreneurs and the important role they play in creating and growing startups and other emerging businesses.
Women Entrepreneurs on the Rise
Women represent more than half the United States population and are vital to our workforce and economy. In recent years, particularly since the pandemic, female entrepreneurship has been on the rise. 2022 marked the third consecutive year that women created about half of new U.S. businesses, compared to just 29 percent before the pandemic.
Survey data from Guidant found that women small business owners were primarily motivated by being their own boss (27 percent) and dissatisfaction with corporate America (23 percent). The majority of women business owners are Gen X (55.7 percent), followed by Boomers (29.9 percent) and Millennials (14.4 percent).
In another report, 64 percent of women business owners cited the need for flexibility as the reason they started a business. The same report shared that female entrepreneurship is growing most quickly in markets outside of the country’s largest hubs, including Louisville, Oklahoma City, Hartford, Columbus, Raleigh, Nashville, Baltimore, Charlotte, Pittsburgh, and Portland.
Venture Capital Funding for Female-Founded Startup Lags Behind
Over the last 15 years, venture capital investments have grown exponentially, going from $29.9 billion in 2006 to a peak of $345.4 billion in 2021. But VC funding for female-founded startups hasn’t increased at the same rate. According to PitchBook, female-founded startups received 7 percent of VC deals in 2023. This translates to just 2 percent of the total capital invested in venture-backed startups nationwide.
Women are also underrepresented when it comes to investors, accounting for less than 15 percent of check-writers in the U.S.
Despite this concerning trend, female founders are performing well. Research shows that companies founded by women had 63 percent higher multiples on invested capital and generated 78 cents in revenue for every dollar invested, compared to male-founded companies which generated 31 cents in revenue for every dollar invested. A study by BCG also found that companies with gender-diverse leadership teams were 15 percent more likely to financially outperform their peers.
Related: Women at Tech Startups: Breaking Down the Barriers
Empowering Female Entrepreneurs
It’s important that we continue to empower women in the startup community, as well as those thinking about joining. When women succeed, it benefits us all. According to an analysis by Citi Global Insights, reaching gender parity in entrepreneurship worldwide could add $2 trillion to the global economy and create as many as 433 million new jobs.
To set up women entrepreneurs for success, there are a few things we should focus on as a society:
- Tackling the Childcare Challenge: Limited access to affordable childcare prevents women in the U.S. from pursuing entrepreneurship. Increasing access to childcare will not only open opportunities for women interested in starting their own businesses but will also help more women join or reenter the workforce in general.
- Providing Mentorship: Connecting with someone who understands the highs and lows of entrepreneurship can be extremely beneficial for female startup founders. In fact, research shows that when female entrepreneurs receive mentorship from other women, they’re more likely to have business success.
- Increasing Access to Capital: As noted above, female-founded startups receive just 2 percent of funding from venture capital firms. Creating more opportunities for female entrepreneurs to access capital, whether it’s through VCs or other funding sources, is critical to addressing bias, closing the gender gap in VC funding, and ensuring women have the resources they need to grow their businesses.
Related: How to Create a Startup Company Culture That Values Diversity and Inclusion
