Ecosystem

Narrowing the Gender Gap through Entrepreneurship

Amy Cortese | March 16, 2015

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The gender gap. It’s 2015, and we’re still talking about it. Recent headlines have highlighted the lack of women at top museums, in Silicon Valley, in Hollywood, and at the high-powered Davos gathering, to name just a few male bastions. Across corporate America, women represent just 15 percent of executive officers, 8 percent of top earners, and 5 percent of Fortune 500 CEOs. They hold just 17 percent of Fortune 500 board seats (and women of color just 3 percent). At this rate, according to the Center for American Progress, it will be 2085 before women reach parity with men in leadership roles in the U.S.

That’s why it is heartening to see the rise of female entrepreneurship. Rather than being stymied by the establishment, more women are choosing to write their own rules. The number of women-owned firms is growing at 1.5 times the national average (and minority women-owned firms are growing even faster).

That’s a good thing. Studies by the Center for Talent Innovation and others demonstrate that diversity at leadership levels increases performance and innovation. Another recent study found that women leaders were rated on 360 evaluations as better overall leaders than their male counterparts.

Women also tend to infuse their businesses with a social mission or purpose: Zipcar and TaskRabbit—two sharing economy trailblazers—were founded by women. Kiva, the pioneering microlending site, was conceived by Jessica Jackley in response to the challenges she witnessed on a trip to Africa.

But female entrepreneurs face their own set of challenges—in particular, obtaining the capital they need to grow their businesses. Loan approval rates for women-owned companies are 15 to 20 percent lower than for their male-owned counterparts, according to the National Association of Women Business Owners. And when it comes to venture capital, women-led businesses make up just 13 percent of funding—a 20 percent leap from 2012.

In fact, women seeking first-year financing receive less than 15 percent of all early stage capital, even though they represent half of the companies founded, notes Deborah Jackson, a former investment banker who recently founded Plum Alley, a crowdfunding and e-commerce site for women-owned businesses.

Plum Alley is part of a growing ecosystem arising to support female entrepreneurs. This includes training and support programs such as Girls Who Code, a nonprofit that works to close the gender gap in technology, and digitalundivided, for women entrepreneurs of color. There are also boot camps, such as one run by Springboard Enterprises—think of it as a Y Combinator for the X-chromosome set. Since its founding in 2000, 545 female entrepreneurs have participated in the Springboard program, spawning success stories including Zipcar, iRobot, TheGrommet, and Crowdnetic.

More Women Investors Means More Women Funded

But the most exciting new piece of the puzzle is on the funding side. Angel networks such as Golden Seeds, 37 Angels and Astia Angels, and venture funds such as the Women’s Venture Capital Fund,  have sprung up in the past several months to invest in female entrepreneurs. Some of the founders of these groups—such as Angela Lee of 37 Angels—are alumni of the Pipeline Fellowship, an angel investing boot camp for women launched in 2011.

Building a base of female investors is important: more women investors means more women-led companies funded. According to the Kauffman Foundation, venture funds with women on their teams invest in women founders 70 percent of the time. And the investment pays off: women entrepreneurs bring in 20 percent more revenue with 50 percent less money invested, according to Kauffmann.

The efforts are bearing fruit: women represented just 5 percent of all angel investors a decade ago; in 2012 they made up 22 percent. And 16 percent of the entrepreneurs seeking angel capital in 2012 were women, with 25 percent receiving investments.

But the biggest game-changer for women may come from alternatives such as crowdfunding that bypass the financial establishment altogether and broaden the concept of angel investing. By letting entrepreneurs reach out to their social networks and like-minded investors, crowdfunding promises to level the playing field for women and other underserved groups.

In fact, women are thriving on these platforms. Indiegogo, the popular rewards-based crowdfunding site, notes that 47 percent of campaigns that reach funding goals are run by women. On Crowdcube, a three-year old equity crowdfunding platform in the U.K., only 10 percent of entrepreneurs seeking funding are women. Yet they are disproportionately successful, making up 41 percent of successful campaigns on the site and raising an average 11 percent more than men. Plum Alley’s Jackson says, “I feel like this is the time” for women.

Let’s hope she’s right.

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Comments

  1. Yes ma’am! Excellent! I just responded after writing a blog on this very thing a few days ago. I have to say, I’m NOT getting women lining up to use our Crowdfunding law here in Oregon. I am beginning to realize it may be what one women said to me recently, “I’m probably just overthinking this, but it sounds like it would be intimidating.” I think women may use crowdfunding when it is online and distanced from themselves, but when they have to stand in front of someone in person and ask for investment, it’s a whole different ballgame. I’m worried.

    We’re launching an all-women cohort in September. Wanna come out and visit?

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