State of Funding: Women Entrepreneurs
A quick glance at the numbers would tell you women business owners (WBO) are doing fine. The latest stats available (note: these are pre-COVID numbers) from the National Women’s Business Council show in 2019, women owned nearly 13 million businesses in the United States (about 42% of all companies), employing 9.4 million workers and generating $1.9 trillion in annual revenue.
But look a little deeper, and the numbers tell a different story. At the start of the COVID-19 pandemic, from February to April 2020, the number of female-owned businesses dropped 25%. And only 10% of businesses owned by women have employees.
Since this is National Women’s Small Business Month, let’s take a look at the state of women-owned businesses.
Women Entrepreneurs are Stressed…
According to the just-released 2021 Women Business Owner Spotlight from Bank of America, 90% of women small business owners say the COVID-19 pandemic has added stress to their business lives and created “disproportionate challenges” this year. These added stressors led to half the business owners surveyed changing their approach to employee wellness and benefits. Top changes include:
- 61% of the WBO enacted a more flexible work schedule
- 45% allow employees to work remotely
- 23% increased the number of paid time off/vacation days
- 19% offered more paid sick days
To keep their employees on board during the pandemic, but perhaps adding to the stress, 48% of the women entrepreneurs cut their own pay.
…But They’re Also Optimistic
Despite the stress, the WBO expect their revenues to grow over the next year (61% compared to 31% last year). In addition, 57% expect their local economies to improve (compared to 32% last year), and 50% think the national economy will get better as well (vs. 28% in 2020).
Access to capital remains an issue for women business owners. In its just-released survey, Groupon reports that 54% of women entrepreneurs say they’re held to a different standard than their male counterparts when accessing capital.
Last year Sharon Miller, the President of Small Business at Bank of America, told me, “Women think they have to have it perfectly right before they go to the bank. Many men come in without even having a concept. Women need to get [to the bank] sooner. Don’t wait until it’s perfect. Go now so you can get advice from professionals and learn what you will need to do to get funding. It’s never going to be perfect. Don’t be afraid to come in.”
And research from the Kauffman Foundation shows women-owned startups pay higher interest rates and take on more collateral than similar businesses owned by men.
Gender Funding Gap
For women seeking venture capital, the financial reality is even gloomier. According to a report from Babson College released last year, Catalyzing Change in Equity Investing: Disruptive Models for Financing Women’s Entrepreneurship Diana International Impact Report, of the $130 billion venture capital funds invested, companies with a female CEO got less than 3% of the funding. And less than 0.2% of all VC funding went to women of color. While these numbers remain sadly steady, according to a report from Crunchbase, startups with all-female founding teams received 2.4% in 2020 of VC investment dollars and about the same for the first few months of 2021.
The gender funding gap is an important issue. Without equal access to capital, women business owners do not have equal opportunities to grow, innovate, or scale, limiting their ability to succeed. This is a contributing factor to why so few women-owned businesses earn more than $1 million annually.
A report from Bank of America and Babson College, Beyond the Bucks: Growth Strategies of Successful Women Entrepreneurs, which is part of a more extensive research collaboration between Babson’s Center for Women’s Entrepreneurial Leadership (CWEL) and Bank of America Private Bank, says women need to create “alternate paths to success for themselves.”
Lakshmi Balachandra, Ph.D., assistant professor, entrepreneurship at Babson College and the principal researcher on the project, says you can “turn the challenges into opportunities” by “building on your skills and strengths.”
The report recommends entrepreneurial women:
- Explore various capital alternatives
- Develop a sustainable and talented workforce
- Buy from women-owned businesses
- Be a mentor, seek a mentor
- Join or create new networks
There are several VC firms led by women or with a solid record of investing in women-owned businesses. Find them. They “should not be the only options, but they should be priorities.” Two companies that invest in women-led companies are 37 Angels and Belle Capital. In addition, 37 Angels compiled a list of lending resources specifically for female entrepreneurs.
There are numerous resources women business owners can turn to. You can compare how your small business is doing with other companies in your state or across the country in the newly-released Small Business Revenue Index from Kabbage.
In partnership with Seneca Women, Bank of America just launched the Bank of America Access to Capital Directory. This platform helps educate women-owned businesses to “navigate the capital landscape and identify potential sources of funding, such as equity, debt, and grant capital.”
In the Women Business Owner Spotlight report, 24% of the women business owners said that mentors were beneficial for helping guide through the past year. And Bank of America’s Sharon Miller recently told me she “encouraged women business owners to make it a priority to build a strong network of peers and mentors. A strong network provides women with an opportunity to connect and share both common and novel experiences, which is immensely helpful—especially for women entrepreneurs looking to get their feet off the ground and grow their businesses. In addition, a solid network can unlock access to resources, expertise, and unexpected opportunities, all of which can help women thrive.”
And, of course, women business owners or startups can turn to SCORE to help guide them. I don’t usually get personal here, but SCORE mentors helped my company navigate a recent sale of our website. We couldn’t have done it without them. So, seriously, get a SCORE mentor today.