Entrepreneurs are among the most impactful actors in our economy because of the roles they play in creating new jobs and bringing breakthrough technologies to the marketplace. Despite their importance, female entrepreneurs remain a largely untapped economic force. The number of highly educated women indicates that females have the potential to start high growth businesses, but research shows that women have not pursued high potential entrepreneurial endeavors at the same pace as men. Consider these facts about women from the Kauffman Foundation, Astia, and Babson College, for example:
- They are well educated: Women represent 51 percent of the nation’s PhDs, 51 percent of business school applicants, 67 percent of college graduates, and more than 70 percent of 2010 valedictorians.
- They are in powerful positions but are not leading companies: Women became the majority of the labor force in 2010 for the first time in U.S. history, holding 51.4 percent of managerial and professional jobs, but only 3 percent of Fortune 500 CEOs are female.
- They own low growth, lifestyle businesses, not high growth, cutting edge companies: While data shows that women own 30 percent of all new firms, only 3 percent of female entrepreneurs own high growth firms.
- They do not get their fair share of investment capital: Women-led businesses receive only 5 percent of all equity capital investments and just 3 percent of women-led firms attract venture capital investments.
It is of national economic importance that women be encouraged to become high growth entrepreneurs and be supported in growing their businesses. According to Babson College research, if female-led startups received the same level of capital investments as male entrepreneurs, they would add 6 million jobs to the economy within 5 years—2 million of those in the first year alone. And, even without the extra infusion of cash, female-led startups have lower failure rates than those led by men. According to a recent report from Catalyst, Fortune 500 companies with 3 or more women on their Boards of Directors have a 73 percent higher return on sales, 83 percent higher return on equity, and 112 percent higher return on invested capital.
So, why aren’t women founding or leading innovative companies at the same rate as their male counterparts when data shows that they tend to outperform the market? Anecdotal research points to a lack of role models as the root cause of this disparity—women who don’t have female high growth role models are less likely to pursue high growth entrepreneurship. Additionally, a study by the University of Wisconsin attributes the low female high growth startup rate to negative self-assessments and biased self-perceptions. Even when women have decades of experience behind them, they are fearful that they are not qualified to start a company. Women may also shy away from the risk associated with high growth ventures because they cannot access capital. Some believe this disparity results from hidden biases and fears of “the other” in the investment arena. And, since 95 percent of venture capitalists and 85 percent of angel investors are men, the capital access gap may also stem from women’s limited networking opportunities in what is still perceived as a “boys club.”
These facts indicate that support and encouragement from key people, including successful entrepreneurs, investors, and business advisors, can benefit women thinking about launching a high growth business. JumpStart, a nonprofit venture development organization committed to growing Northeast Ohio’s economy and entrepreneurial ecosystem, understands the value that mentoring and validating new business plans has on entrepreneurs’ confidence. We work closely with innovative entrepreneurs, helping them set and achieve high growth budgets and milestones, gain early customers, raise follow-on capital, form a board of advisors or directors, and hire the top talent needed to grow quickly. JumpStart’s assistance team consists of former entrepreneurs who have grown early-stage companies themselves. These accomplished advisors have built boards, removed technical risk, raised capital, and hit operational milestones and are willing to share their experience and connections to ensure the success of others.
Whether you are a man or a woman, now could be the right time for you to start a business—startup costs are down, you can hire better talent for less, and the federal government is supporting the entrepreneurial ecosystem by offering non-dilutive capital, low-interest loans, and tax breaks to entrepreneurs. Northeast Ohio entrepreneurs looking to launch a company should start at the JumpStart Entrepreneurial Network website.
Leah’s primary focus as JumpStart’s Market Analyst is developing a deep understanding of the key challenges and opportunities facing entrepreneurs and early-stage companies. Using her experience leading research projects and framing problems to identify creative solutions, Leah works to build stakeholder relationships, ensure the growth and success of client and portfolio companies, and drive organizational strategies. Additionally, Leah brings her insights to life through communications and advocates for and connects entrepreneurs to additional capital and service resources beyond those provided by JumpStart.