A new research report from the Kauffman Foundation finds that women entrepreneurs have far lower levels of participation in growth-oriented companies than men do. This might be surprising, considering the attention paid to the “mompreneur” category, but that’s the key differentiator: women entrepreneurs are far less likely than men to own growth-oriented firms. Fewer than one million women-owned firms have any employees other than the owner herself.
Women-owned businesses account for only about 16 percent of the nation's employer firms and, among high-growth firms, fewer than 10 percent of the founders are women. Translated to dollars and cents, the difference sounds even more profound: only about two percent of women-owned firms generate more than $1 million a year.
The researchers view this as an unprecedented opportunity. “These are striking statistics that suggest women entrepreneurs represent a large and untapped resource for generating jobs and high-growth businesses,” according to the authors of the study.
Survey Findings: Two challenges to overcome
The qualifications are certainly there: women represent more than half of the educated U.S. population, and more than half of them are in the work force.
To help explain the low percentage of women running high-growth firms, the researchers surveyed nearly 350 female tech startup leaders to see if they could pinpoint the underlying reasons.
The study found that while all entrepreneurs face many of the same obstacles in starting a business, there are two key challenges that, if addressed, could bolster the ranks of women entrepreneurs:
- Lack of mentors: Surprisingly few women in the survey cited a role model as their motivation for starting a business—and a lack of available advisors is mentioned as one of their top challenges. More access to mentors is an important strategy for encouraging women to start and run successful high-growth companies.
- A financing gap: A high fraction of these survey respondents cited financial capital as a critical challenge to launching their firms (72.1 percent), and the majority (nearly 80 percent) used personal savings as their top funding source. Men who start firms seem to be expecting more growth right off the bat – they typically have nearly twice the capital that women do.
Clear benefits to finding answers
Accelerating female entrepreneurship could have the same positive effect on the U.S. economy that the large-scale entry of women into the labor force had during the 20th century, according to the study. It went on further to challenge policymakers and relevant organizations to help women overcome these hurdles. “The untapped economic potential of female entrepreneurship, especially in high-growth fields, could be the catalyst for economic growth in America,” the study says.
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