There are nearly 13 million women-owned businesses in the US, according to the State of Women-Owned Businesses Report by American Express. These businesses employ 9.4 million workers and are responsible for $1.9 trillion in revenue. But is entrepreneurship among women increasing, stagnant, or declining? Where are they thriving? And are they finding startup capital?
We asked several female founders (and one male founder) to enlighten us on some of the stats surrounding female founders.
On average, women started 1,817 new businesses every day between 2018 and 2019—which represents a slight decline from 1,821, according to the report. During a 5-year period, women-owned businesses increased by 21%, compared to just 9% for all businesses.
“Around 30% of small businesses in the US are female, and stats have shown that this number is growing around 4% per year,” says Manasi Vartak, founder and CEO at Verta, which develops software for AI and machine learning deployment for enterprise data science teams.
When it comes to industry representation, most women-owned businesses exist in 3 categories: other services (which includes hair and nail salons and pet care), healthcare and social assistance (which includes child care and home healthcare services), and professional/scientific/technical services (which includes lawyers, architects, bookkeepers, consultants, and personal relations firms).
However, women are making strides in other industries as well. “In my circles, almost every single woman is either a full-time founder or part-time entrepreneur and I love it,” says Stephanie Corliss, cofounder and COO at staffing firm SnapShyft. “They are in everything from CPG, e-commerce, agtech, medtech, food manufacturing, to HRtech like us, and in my network, it does not appear to be constrained geographically, for what it’s worth.”
Vartak sees progress but admits that it’s slow progress. “In the technology industry, in particular, the number of female-owned businesses is much lower compared to the cross-industry average, and women-owned businesses are clearly underrepresented,” she says.
While more women are starting businesses, most of them are bootstrapping, according to Janay Symonette, CEO and founder of ProPay Software and FindrPro. “About 21% of SBA loans go to female-owned businesses, and they usually receive 2 times less the amount than male business owners receive in loan amounts.”
Ingrid Vanderveldt has experienced this disparity first-hand. She’s the chairman and CEO of Empowering a Billion Women (EBW), EBW Distributors (a division of EBW2020), and Vanderveldt Global Investments. “Statistics show that less than 2% of women entrepreneurs in the United States earn more than $1 million in revenue, and women CEOs received just shy of 3% of venture dollars in 2019.”
Several years ago, Vanderveldt says she was building her first company and trying to raise money. “One of my advisers said, ‘You do not look like, act like, or talk like any of the CEOs that investors are used to funding, and as somebody who cares about you, I need to tell you I don’t think you’re going to get this done.” She was advised to pack it up and go find a job before it was too late. “You will not be able to put the money together—it just isn’t going to happen.”
Her experiences are not unique. “Venture funding for female founders has hit its lowest quarterly total in 3 years,” says Navin Goyal, MD, cofounder and CEO of LOUD Capital, a venture capital/alternative asset management fund based out of Columbus, OH, that focuses on reaching out and funding businesses founded by people from underrepresented and underprivileged backgrounds. “Firms invested a total of $434 million in Q3—the lowest figure since the second quarter of 2017, according to PitchBook data,” he says. “The third quarter total also amounts to a 48% drop in funding from Q2, when female founders received $841 million across 132 deals.”
Overall US venture capital investments in 2020 are on par with previous years, but Goyal says they’re not being distributed equally among gender lines. “Those funds haven’t necessarily reached female business owners, dealing them a disproportionate blow, and investments in women-led companies this year are on pace to be the worst since 2017,” he says.
Goyal explains that compared to men, women have always struggled to raise startup capital. “Women business owners are less likely to seek business loans than male business owners,” he explains. “A third of male business owners seek business financing, compared to just a quarter of women business owners; additionally, women-owned startups receive just 7% of venture capital funds.”
But there are some bright spots. Vartak’s company, Verta, just raised $10 million in Series A funding from Intel Capital. “The good news is that there are some amazing Venture Capital Funds out there, which are particularly investing in women-owned businesses, and this gives us hope,” she says.
Also, Corliss shares what happened to her and what she sees within her general network. “We were lucky to get early backing from a successful angel investor that came to us pre-product wanting to invest—and he did.” The company decided to take the accelerator route to secure additional capital. “We were selected to both gener8tor and 500 Startups and received funding from both, which was a big win for us, added a strong layer of validity for other investors to point to, and has given us the most amazing network to lean on.”
Corliss recommends that women become involved in the local startup community, where they can contribute and offer support, and also look for opportunities to showcase themselves and their startups. She also suggests looking at accelerator programs that are a good fit for your business.
“For example, 500 Startups was always an ideal choice for us because of their impressive track record backing women founders and globally diverse teams, and of course 500 is led by an amazing woman in technology/VC—Christine Tsai, CEO/Founding Partner,” Corliss explains. “There are also some spectacular groups like Sogal Ventures that really champion female founders.”
According to Goyal, women-led businesses have been successful in raising money using crowdfunding and SBA loan programs. “Women have a higher success rate in crowdfunding than men of about 8%; additionally, 57.4% of the SBA microloan program’s loan went to women-owned or women-led businesses.” Another popular microloan option for women is Kiva.
Goyal notes that women entrepreneurs ask for, and receive, less money on a typical loan than their male counterparts. He believes that women should use this knowledge to ask for more funding.
In addition, Vanderveldt says that women can gain an advantage by becoming a part of trusted peer groups. Before she launched EBW, Vanderveldt was the Entrepreneur-in-Residence for Dell, overseeing a $125 million fund. To date, she’s been part of the seed funding investing teams on just over a dozen startups.
“There is so much more that can be done—at EBW 2020, our goal is to become the number one financial empowerment community for women leaders and entrepreneurs of purpose and impact,” she says. “What differentiates our group of women, our tribe, is that we are a sisterhood—women who want to do well in every sense of the word because they are here on this planet to make their impact.”