On November 19th we are excited to celebrate Women Entrepreneurship Day – a national day celebrating women entrepreneurs. And there is a lot to celebrate! The 2019 State of Women-Owned Business report showed that women-owned businesses are driving economic change in the United States. 42% of all businesses in the USA are women-owned, and over the past five years this number has increased by 21%. This is compared to an overall growth rate of businesses being only 9%. Employment by women-owned businesses also rose 8% compared to the 1.8% increase for all businesses. And the news gets even better when we look at women of color. The number of businesses owned by women of color grew at double that rate – 43%. And the best news? Colorado is helping to lead the charge, rating at number 10 for the top states with economic clout (defined as growth in the number of firms, and growth in employment and revenue).
However, while we have a lot to celebrate, we also have a lot of work still to do. Despite the fact that businesses owned by women generate $3.1 trillion in revenue, there is still a huge disparity in funding that goes to women-owned businesses. Women receive less than 3% of all venture capital funding, and only 12% of all VC checkwriters are women. It has been shown by research that female investors are more likely to invest in women entrepreneurs, so the disparity in leadership is a serious problem. As the recent Pitchbook All Raise report shows, this disparity gets even worse when we look at women of color, and has serious economic consequences. And this issue of access to funding continues outside venture capital. Only 30% of women are approved for business loans compared to half of all business owners.
Cash-flow and access to capital is one of the top challenges for entrepreneurs anywhere, especially in rural America. Without access to finance, entrepreneurs struggle to get started, grow, and scale. As we see the gender disparity in this access, it is crucial that we close the gap to enable all entrepreneurs to succeed. With such huge disparities in venture capital, we see a role for CDFIs, community funds and community banks to help bridge this divide by providing accessible and innovative sources of capital. Venture capital is just one tool for funding, and often loans can provide a cheaper, more accessible option especially for smaller or rural businesses. We can also play a role outside of funding. Women entrepreneurs face other challenges outside of raising funds, and as an ecosystem of change-makers and entrepreneurs we must also look to address these challenges. It has been shown by research that a lack of access to mentorship, navigating work-life balance, and general implicit bias around women in entrepreneurship all have effects on the number of women entering the world of entrepreneurship or staying in it. By providing technical assistance, collaborating with other organizations supporting entrepreneurs, and critically assessing who and how we make funding decisions, we can continue to break down barriers that female entrepreneurs face.