How Tech is Leveling the Playing Field for Women Entrepreneurs
Finding entrepreneurs to jumpstart your small business is an old game, but the chances of bumping into the right one—between one looking to ride your idea and one looking to rig it with horsepower—depend on your gender and income level, a survey by the Kauffman Foundation has found.
The difference between the two is crucial. Most Americans are familiar with the run-of-the-mill entrepreneur, engaged in so-called “subsistence entrepreneurship”—or someone looking to support a business and maintain its livelihood.
Such entrepreneurs, the survey found, were equally familiar to people making less than $25,000 and those making over $100,000. In fact, they were “both more likely to know an entrepreneur than respondents in other income brackets,” writes Patrick Clark, Bloomberg Businessweek reporter. Knowing a subsistence entrepreneur was also pretty even between genders and regions.
Where the disparity lay is in knowing a growth entrepreneur, so-called “gazelles,” writes Paul Kedrosky, the survey's author and contributing editor to Bloomberg Television. Growth entrepreneurs breed job-producing, GDP-adding machines that “[grow] more than 20 percent a year and [have] more than $1 million is sales," he writes.
Here, the field gets a little more uneven. Lower income Americans are half as likely to bump into growth entrepreneurs than their wealthy counterparts. And compared to 25 percent of male respondents, only 12 percent of women are likely to meet someone who could greatly expand their business or idea. Since knowing an entrepreneur affects whether or not someone becomes one themselves and is a “significant factor” in the ultimate success of a small business, Clark stresses the importance of “would-be entrepreneurs, rich or poor, [to get] together with people running growth companies [to] help encourage more gazelles.”
But the advent of widely available networking resources, such as startup hubs or crowdfunding services, are making the gap more tenable, especially for women, who are often shouldered out of male-dominated circles of high-end entrepreneurs. At the 2013 Women 2.0 “The Next Billion” conference in San Francisco—an event that attracted nearly 1,000 female business owners, would-be entrepreneurs, and a handful of men—it was revealed that “women-led private technology companies are more capital-efficient, achieve 35 percent higher return on investment, and, when venture-backed, bring in 12 percent higher revenue than male-owned tech companies,” writes Karen E. Klein, reporter for Bloomberg Busnessweek.
Those who managed to find investment and success, in other words, are outstripping the gains of their male counterparts, at least in tech.
In a post for GOOD, Sarah McKinney, co-founder of AMP and attendee at the conference, explained the dizzying relation between studies that show how routinely women-run businesses are passed over by investors and data that reveals how successful those businesses prove to be.
This is another reality that I've been choosing to ignore as I continue cultivating relationships with potential investors: A mere two to three percent of venture funding and 12 percent of angel investment went towards women-led companies in 2011, which makes little sense given research published by Dow Jones showing venture-backed companies that include more women on their executive management teams are more likely to succeed. Surely, we need more men investing in women. But we also need more women at the investor table.
McKinney's tech startup, AMP, utilizes the power of cheap, readily-available online networking tools works by filtering resources to be used by professionals and social entrepreneurs. She adds, "...with 'women' being one of the many keyword tags."
Those cheap, penetrative online resources, said Shaherose Charania, founder and CEO of Women 2.0, are what's eating away at the barriers to entrepreneurship. “Startup costs have come down, and open source approaches enable individuals who don't necessarily have an extensive technical background to become part of the entrepreneurial ecosystem,” she said in an interview with the Kauffman Foundation.
What this means is that walls keeping people from entrepreneurs are slowly crumbling away, fostering the kind of collaborative and imitative atmosphere gained when sharing the same space as like-minded, able entrepreneurs. And even though today's ecosystem makes it easier for middle-aged men of modest income to find their business-backers, as tech more fluidly connects people across gender or income groups (and as women-owned businesses, small or large, keeping proving successful) that holding may soon change.
Photo via (cc) Flickr user democonference