Being a woman can be an entrepreneur’s biggest challenge and greatest strength. Every day, women entrepreneurs are overcoming challenges and creating businesses that are both profitable and socially responsible against the odds.
When the first reports on women in business were released in 1972, only 4.6% of all US businesses were owned by women. Most of these businesses employed fewer than 5 people and generated $7.2 billion in revenue. Women achieved these numbers despite not being able to apply for a business loan or their own credit.
In 1988 Congress finally passed a law (HR5050) to allow women to take out business loans in their own name and today those numbers look a lot different. Now 42% of all U.S. businesses, are owned by women (13 million), employ 9.4 million workers and generate $1.9 trillion in revenue. (NWBC 2020 Annual Report Final)
The number of women-owned brands are increasing daily. Take a moment to share your favorite. It may be one you have been using for years, or one you’ve just discovered.
Despite this increase, women entrepreneurs are still behind the curve when it comes to getting funding to start new businesses. Research done by Columbia University found that women were 63% less likely to receive venture capital than men, even though they are equally, if not more likely to achieve success when given the funding.
The women entrepreneurs we spoke to agreed that funding is one of the biggest challenges that women in business face and it needs to increase for women to move forward. They also agreed that some of the biggest challenges they face are also their greatest strengths.
The Challenges
“The glaring elephant in the room is access to capital.”
Sesha Kadakia, co-founder, Tangify
Sesha Kadakia is co-founder of Tangify, a startup that makes it easy to determine if an idea can be patented. You can learn more about their free tools and other products at www.tangify.ai.
She has an interesting take on how a lack of funding pushes women to do better with less:
“It still confounds me that less than 2% of VC funds went to all-women teams…in 2022! The number for mixed-gender teams was better at 17% but still a far cry from the parity we deserve. Women-owned businesses have been forced to get creative, be scrappy, and control burn rates in ways their counterparts haven’t had to. While it leads to better business management, the underlying issue of access to capital unfortunately compounds.”
Sesha Kadakia, co-founder, Tangify
Research backs Kadakia’s observation that women’s lack of funding opportunities lead them to become more innovative and run a better managed business. A BCG and MassChallenge study found that women entrepreneurs generate 10% more revenue with less than half the funding.
Why Women-Owned Startups Are a Better Bet, BCG and MassChallenge
Heather Roberts, founder and chief volunteer of Mom Bomb isn’t afraid of getting her hands dirty when there’s work to be done, but she also know how to get them clean. Mom Bomb sells all natural, vegan, Made in the USA bath and shower products and donates 100% of the profits to families in crisis.
Roberts considers multitasking women’s greatest challenge, but like Kadakia, found what has challenged her has led her to success.
“It wasn’t until I learned to slow down and not do as much that I learned how to both scale and take on a more wholistic growth mindset which ultimately benefits the business long term.”
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Women Owned Businesses Outperform–Why?
Not only do companies with female leadership generate more revenue but women leaders are more innovative. First Round Capital found that women-founded companies outperformed all male companies by 63%.
For Heather Roberts, success is all about multitasking and logistics planning:
“There’s an old joke about men and their “nothing box.” I’m told this “nothing box” is a place where men think about “nothing.” Women don’t have a “nothing box” we are ALWAYS thinking about something, and then subsequently, acting. And as most women will tell you – there is ALWAYS something to do! Our brains looks like the middle of a CSI episode with multi-colored strings attached to boxes that overlap a map on a large wall, all to keep everything straight.”
Heather Roberts, Mom Bomb
Gender perception has a lot to do with how women perform. Women feel they need to be more prepared when asking for money. Harvard Business Review reports that female led businesses come to the table with stronger business plans to counteract the heavy pushback they face from investors who often assume they don’t have the technical knowledge. In short, women have to work harder. Kadakia likens it to imposter syndrome.
“Imposter syndrome can be a curse and superpower. To feel like we belong in spaces where we aren’t well-represented, we sometimes feel like we need to blow expectations out of the water. We believe in our capabilities but still feel pressure to prove we belong. This has the effect of forcing us to question our assumptions, validate our reasoning, think critically, and get buy-in from our stakeholders. In other words, we’re right more often because we’re humble, intellectually honest, and communicative, which makes us better risk managers.”
Sesha Kadakia, co-founder, Tangify
What needs to improve?
We have come so far in many ways, but when it comes to women leading businesses, our access to capital is the exact inverse of what it should be based on the fact that our companies DO outperform.
Heather Roberts, Mom Bomb
What will lead to more success? Women getting more funding? Kadakia prioritizes three areas that need to improve to get women on a level playing field when founding new businesses.
1. More Women Decision Makers
“We need more women decision-makers among capital providers. Having women control the purse strings results in a more holistic approach to investing and improves access for overlooked founders.”
Sesha Kadakia, co-founder, Tangify
2. Better Social Support
“How many times have we heard that the best way to approach VCs are through warm intros made by other founders in their portfolio companies? How often does notching a successful outcome in a previous startup compel a prospective investor to take a second look? If 83% of founders making warm intros are all-male teams and if half of the population hasn’t been given the opportunity to notch a successful outcome for investors, it’s easy to see how all-women and mixed founder teams can be perceived as riskier – even when empirically false.”
Sesha Kadakia, co-founder, Tangify
Kadakia, herself a supporter of women entrepreneurs who want to get patents, shares these organizations that help women in business:
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- All Raise: Helps increase women and nonbinary leadership and funding opportunities
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- Golden Seeds: An investment firm that funds women-owned businesses
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- The Capital Network: A founder-focused fundraising education program
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- Graham & Walker Catalyst Program: Supports women in fundraising readiness programs
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- Scroobious: A pitch education and connection platform
3. Demand More!
Finally, Kadakia says that women need to speak up and demand more.
“We need to be intentional about calling out unbalanced situations and demanding better. I recently attended an investor-founder event where just 28% of investors and 14% of founders in the room were women. This imbalance is admittedly not terrible in the context of the broader startup ecosystem. Having spent the majority of my career in a male-dominated industry, however, the imbalance didn’t even occur to me. I’m guilty of complacency because I’m conditioned to see it as the norm – but it shouldn’t be.”
Sesha Kadakia, co-founder, Tangify
Women are definitely changing the norm. As their numbers increase, so does the profitability and social responsibility of companies.
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References
Preparing Women to Be Entrepreneurs – The New York Times
How HR 5050 Changed Entrepreneurship For Women
47+ Women in Business Statistics | Incfile
Why Aren’t Startups Founded by Women Getting More Funding? | Newsroom
Why Women-Owned Startups Are a Better Bet
How Diverse Leadership Teams Boost Innovation
Women-Owned Businesses: Statistics and Overview – Fundera Ledger