Women entrepreneurs find success despite lack of access to investment capital

Throughout history there are numerous success stories of female entrepreneurs, yet women continue to face a number of challenges when starting and growing their businesses. From Elizabeth Hobbs Keckley, a former slave who ran a prosperous dressmaking business that eventually led to her designing and sewing dresses for Mary Todd Lincoln, to Anne Wojcicki, founder of genetic testing and analysis firm 23andMe, women have proved they have what it takes to reach the top of the entrepreneurial mountain.

However, women – and especially minority women – often face institutional and systemic challenges including obtaining funding for their ventures, which can make the climb to the top slower and more difficult. As we foster the development of entrepreneurial ecosystems, it’s important to design them to level the playing field for women.

Plenty of initiative

Despite an overall decline in entrepreneurship in the United States, women are still responsible for the launch of a large portion of business startups in recent years. In 2018, women started 1,821 net new businesses every day according to research by American Express, which also showed that black women are starting businesses at the fastest rate of any racial group. Black and Brown women start businesses at six times the national average.

Women own 40% of all businesses in the United States, according to the American Express research. Of those businesses, the same research shows 47% are controlled by minority women. That’s more than double the percentage in 1997. Since 2007, the number of businesses owned by Black women has grown by 163%.

Despite the growth in women-owned businesses, venture capital is still funneled to mostly male-owned businesses. Just 2.8% of venture capital funds went to women-owned businesses in the U.S. in 2019, and even less makes its way to minority women.

When it comes to loans, the news is no better. Women-owned businesses receive, on average, almost $5,000 less than men in startup loans, according to Fundera.

Finding new markets

Although they receive less funding than male-owned businesses, women-owned ventures are reaching underserved clientele—and these customers are a driving force in the market.

Many women-owned businesses are started in response to a perceived need based on their personal experiences, which means they’re reaching a demographic that white, male entrepreneurs often overlook. This is especially true when it comes to reaching minorities. According to the National Minority Supplier Development Council, minority-owned businesses collect $1.4 trillion in gross receipts each year.

When we look to the future, that market is only going to grow as demographic shifts point to a future where minority groups will become the majority of the population, which will create a need for the “new majority” to be the economic drivers of the economy.

Lost potential

When venture capitalists ignore women entrepreneurs, they leave money on the table. Potential growth, scale and profit from minority and women entrepreneurs are being lost to the tune of $300 billion in unrealized national income and 9 million jobs not created. Those numbers come from the 1.1 million “missing businesses” the Center for Global Policy Solutions estimates either aren’t started or are unable to be sustained by people of color because of discrimination.

We can’t claim to be building inclusive entrepreneurial ecosystems unless we address the lack of investment resources available to women and minority business-owners. On the podcast Breaking Down Barriers, Dell Gines, senior community development advisor for the Federal Reserve Bank of Kansas City, explained:

“You can’t say you’re an ecosystem builder if you’re not an inclusive ecosystem builder. Because true inclusivity in your ecosystem means that you’re allocating resources to those with the most entrepreneurial talent so that you can create the greatest return […]. If I’m giving a white person more resources simply because they’re white even if they’re an inferior entrepreneur to the Latina that’s starting a firm, my ecosystem is not functioning well or efficiently.”

The future is inclusive entrepreneurship ecosystems

The facts are clear: Women and minority entrepreneurs must be afforded the same access to resources as their white, male counterparts. If we are to create entrepreneurial ecosystems that nurture entrepreneurs of all colors and races, we must begin by addressing the systemic issues in play that prevent these business owners from accessing vital resources, capital, mentoring, networking and education.

At SourceLink, we believe this can start with building (and rebuilding) new economic ecosystems that place a dedicated focus on diversity and inclusive growth. The COVID-19 pandemic and racial injustices that were a large focus in 2020 have had a profound effect on communities and their recognition of the importance of inclusivity. With a second wave of federal funding soon becoming available, communities should evaluate their plans to rebuild to ensure they include sustainability, resiliency and removal of barriers experienced by marginalized entrepreneurs.

SourceLink offers resources and support to help you do just that. Contact us at [email protected] to find out how we can help you create an entrepreneurial ecosystem that serves the needs of all entrepreneurs.