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Unpacking the financial barriers that keep people down.
These are exciting times, people! More women are going all-in and becoming business owners. According to the National Women’s Business Council, the number of women-owned businesses with employees grew 16.7% between 2012 and 2019, compared to a 5.2% growth for men-owned businesses during that same period. What’s more, according to the 2023 Small Business Trends Study from Guidant Financial, millennial women are outpacing their male counterparts by 36% when it comes to business ownership.
Still, women-owned businesses are less likely to receive the funding they need to grow and succeed, as venture capital (VC) funding disproportionately flows to men-owned businesses.
Tipping the scale
While about a fifth of businesses with employees are owned by women, Pitchbook reported that only 2.1% of capital invested into venture-backed startups in the US went to women-owned businesses. This wild disparity becomes slightly less surprising when considering unconscious bias and the fact that just 8.6% of venture capitalists are women, according to the Center for Strategic and International Studies. Representation matters, y’all.
The Tory Burch Foundation, which works to empower women business owners, told Money Scoop that “female entrepreneurs start businesses with 53% less capital than their male counterparts, taking bigger risks like leveraging savings, credit, or a mortgage, and reaping smaller rewards—with 2% ever reaching more than $1 million in revenue.” It’s a high-risk, low-reward situation for women, who tend to earn 21% less than men over their lifetime and have 30% less in retirement savings than men, per a 2022 Goldman Sachs retirement report.
And, believe it or not, the percentage of entirely women-led startups that have received VC funding has increased over the past few years, going from claiming 3.7% of all VC deals in 2008 to 7.4% in 2023, according to Pitchbook. But the total funding that has been allocated to this demographic has consistently hovered around 2%, according to Pitchbook. Keep in mind, this same 2% is being spread among the growing number of women-led businesses. Talk about failing to keep up with inflation. 😬
Loans over funding?
When we look at business loan funding rates for women-owned businesses, women still trail behind their male counterparts there, too. In 2022, women business owners who took on a business loan received an average $55,898 in funding, compared to men’s $93,976, per Biz2Credit’s 2023 Annual Women Owned Business Study.
Small Business Administration programs, business grants for women, and some foundation work focus on empowering and funding women business owners—but these limited competitive sources of capital are not nearly enough to close the disparity gap women business owners face when it comes to traditional funding vehicles.