Women who run their own businesses generate 10% more revenue in five years than men do, according to Boston Consulting Group analysis—a boon for the economy. And yet, right now, there are more male entrepreneurs than female entrepreneurs. By gaining support from investors and supporting each other, women can conquer the barriers to entrepreneurial success.
To learn more, check out the infographic below, created by Washington State University’s Online Master of Business Administration program.
Where to Find the Rising Number of Female Entrepreneurs
Nearly a third of working adults in the United States own their own businesses, a figure that amounts to 54.5 million people generating their own paychecks. That means American entrepreneurs are everywhere. While most entrepreneurs operate locally, women are less likely than men to be found running businesses at a national or international scale.
Women operate predominantly in wholesale and retail businesses, but to a lesser extent, their businesses provide health, education, government, and social services, as well as administrative services. The Mastercard Index of Women Entrepreneurs lists just 3 in 10 entrepreneurs as women. On one hand, that’s good news: the gender gap between female and male entrepreneurs is at an all-time low of 1.7%. But there’s still plenty of room to grow.
How Female Entrepreneurs Build Business
Women run nearly 13 million U.S. businesses, providing jobs for nearly 10 million people and raking in $1.9 million in revenue. Their ranks have been steadily growing. According to the Mastercard Index, the female entrepreneurial rate increased by more than 10% in 2018, more than 13% in 2019, and more than 16% in 2020. Still, female entrepreneurs could do so much more. Analysis from Boston Consulting Group suggests that if the number of women entrepreneurs matched the number of men, the United States could add between $2.5 and $5 trillion to its economy.
The Barriers Female Entrepreneurs Face
Increasing the number of female entrepreneurs in the United States isn’t just a matter of more women making the decision to open their own businesses. Boston Consulting Group’s analysis found that women tend to receive more than $1 million less in investment capital than men on average. That’s despite the fact that female-run startups earn 78 cents for every dollar of funding—more than double what male-run startups earn.
Why Education Is Key for Female Entrepreneurs
The Global Entrepreneurship Monitor says education plays a big role in helping women open their own businesses, but that’s not the only benefit of getting an MBA. An MBA helps women learn the basics of business, as well as gain the confidence needed to conquer their fears and take the leap into self-employment. But an MBA also helps women access venture capital, something that men are typically more likely than women to pursue. When female entrepreneurs who have MBAs seek venture capital, their success rate (67%) is almost as high as men’s (70%).
What Makes Women-Owned Business So Successful?
Female entrepreneurs tend to be so successful because their employees are happier, and happier employees are less likely to experience burnout. Also, women tend to draw in more diverse talent. Surveys show most women consider diversity when choosing where to work, which means talented women will be drawn to working with one another. The congregation of smart women means a diversity of ideas, which can help them outperform less diverse businesses.
Removing Roadblocks for Female Entrepreneurs
Research shows women pursue entrepreneurship because it gives them much-needed work-life flexibility—but it's not without roadblocks. And while the entrepreneurial gender gap is decreasing, there’s one age group where it isn’t: ages 25 to 34.
How Can Investors Help?
There are plenty of ways investors can help remove roadblocks for women. First, they can diversify their own boardrooms. Research published in Harvard Business Review shows investors are primarily white men, even though venture capital firms with more women on staff showed an average increase in returns. Second, they can help grow women’s support networks because women need more than just startup capital. Female entrepreneurs tend to struggle more with a fear of failure owing to their lack of strong support networks. So, they would greatly benefit from access to accelerators, crowdfunding ventures, and new business models that specifically seek to accommodate them.
Finally, investors can change how they listen to women’s pitches. They should be mindful about assuming women lack basic technical knowledge and be aware that women are often more reticent than men to say “you’re wrong.” In addition to encouraging conversations in which women feel comfortable critiquing investors, they should also remember that women tend to be more conservative than men when they approach investors. In other words? Watch for the undersell.
Why Investors Should Support Female Entrepreneurs
Women make great entrepreneurs—and not just because they encourage diversity within their own companies. They’re flexible, savvy, and tapped into products that people want and need. With the right support, women-owned businesses have the power to add trillions to the U.S. economy.
Sources
BCG, “Want to Boost the Global Economy by $5 Trillion? Support Women as Entrepreneurs”
BCG, “Why Women-Owned Startups Are a Better Bet”
Global Entrepreneurship Monitor, “Entrepreneurial Behaviour and Attitudes”
GQR, “4 Ways Businesses Benefit From an Increase of Women in the Workforce”
, “Research: When Gender Diversity Makes Firms More Productive”
