Women entrepreneurs in New York are launching new businesses at an astonishing rate. In fact, New York has far more women- owned businesses than other major cities in the United States. A new study, “Breaking Through: Harnessing the Economic Potential of Women Entrepreneurs” by The Center for an Urban Future, examines the impact of women-led companies on economies across the country. The comprehensive report was made possible by Capital One’s Future Edge initiative; a $150 million, five-year effort to help more American workers and entrepreneurs succeed in the 21st century economy.
The findings confirm that the number of women-owned businesses in New York between 2002 and 2012 grew by a colossal 65 percent or 45 new businesses every day. This added more than 56,000 jobs and $3 billion in payroll to the city’s economy.
What is also evident from this report is that women entrepreneurs face many challenges in New York and across the country. Many of the challenges women face are the result of gender bias and stereotypes. This pervasive bias limits their ability to get funding, break into existing industry networks, attract new clients, and be taken seriously. They often have to work harder to get respect and recognition. These issues affect their ability to grow. With the appropriate support, funding, and training, women-led companies have the potential to make a sizable contribution to the economy.
Here are the top 5 challenges facing women entrepreneurs today:
Women entrepreneurs struggle to raise capital.
Women business owners have traditionally struggled to attract the necessary startup capital as well as ongoing funds to assist in the growth of their businesses. Accessing venture capital especially has been difficult for women.
One contributing factor that explains why women founders attract less funding is the fact that of the top 20 most active venture capital firms in the city, just 11 percent of the investment teams are women. Firms with a woman partner are more than twice as likely to invest in companies with a woman on the team, and more than three times more likely to invest in companies with women CEOs.
The good news is there is an increasing number of alternative financing options available for those seeking smaller loan amounts. Women can apply for SBA-guaranteed microloans, a program that targets early-stage businesses and borrowers with little or no credit history, as well as women and minority entrepreneurs who don’t qualify for larger, conventional loans. In 2014, woman-owned companies in the U.S. received nearly 47 percent of the microloans issued. There are also a number of nonprofit micro-lending organizations like Grameen America and Kiva, which provide microloans to entrepreneurs looking to build businesses in their communities.
Women entrepreneurs have limited access to industry networks and connections.
Networks provide critically important information for entrepreneurs. Networks help entrepreneurs learn more about their industry and build important connections for additional resources and business growth. It is challenging for women to find the connections they need when starting their business and later on when they are seeking advice for business development. For first time entrepreneurs especially, networks provide a safe haven to learn the rules of the game. They are great source of connections for new business.
Women in New York complain that many of these networks are frequently tight-knit clubs where personal and business connections go back years. It’s tough for newcomers, especially women, to be accepted in many of these networks. Women entrepreneurs feel they have to work harder to develop relationships and demonstrate that they belong especially in male dominated industries. They work harder to be taken seriously.
One woman interviewed in the report owns a construction firm in the city. “Being a woman has been probably my greatest challenge. Firms of my size that are managed and owned by men have networks with agencies in a city that are managed by men [who have] a common background and a common culture—I’ll never have it.”
Women entrepreneurs lack business and financial skills.
Many of the women entrepreneurs interviewed for the report mentioned their lack of basic business and financial skills as a major challenge. They had little if any experience in accounting and risk management, legal, tax and regulatory compliance, sales, marketing, and the use of technology. Even women who had the business skills and/or corporate experience cited the need for training in areas like strategic planning as well as hiring and evaluating personnel.
That being said, the report offers suggested resources for women in New York who need training. “A growing number of organizations are providing training and critical support to women entrepreneurs. Nonprofits intermediary organizations such as Grameen American, the Hebrew Free Loan Society, BOC, The Business Center for New Americans, WHEDCO and industry and professional organizations all run training programs for new and seasoned entrepreneurs.”
Women entrepreneurs lack role models and mentors.
Even with industry experience, maybe you never started a business before and, therefore, lack the aforementioned business and financial skills. Maybe you never started or owned a business in New York before, and you need to learn how to navigate launching a business in the city. Role models and mentors are invaluable for new business owners. Role models and mentors as well as strong network connections when available can help women build their skills and subsequently their confidence. Without solid networks and connections, it is difficult to find qualified people who are willing and able to fulfill this need for women business owners. Leaning on more experienced business owners is especially helpful for women who are just beginning the entrepreneurial journey, and for those who face challenges growing their businesses. Entrepreneurs can check out resources like BusinessAdvising.org, an online mentoring platform that matches small business owners with expert advisors in areas such as marketing, technology and finance.
Women entrepreneurs lack confidence.
Women’s self-doubt and lack of confidence affect their ability to effectively pitch their business to attract funding. They are less likely ask for capital or sufficient capital. A lack of confidence therefore holds them back from starting and growing a viable business.
A lack of confidence also causes women to be more risk averse. Women who create successful businesses take calculated risks. They carefully plan for their growth based on a confidence in their ability to sustain and manage growth over time.
Mentors can help new entrepreneurs build their confidence. Other great resources are self-help books on the subject, such as The Confidence Code or Amy Cuddy’s popular TED talk on how to boost your confidence with power poses.
In summary, women-led businesses have great potential to impact the economy. The effort to assist women entrepreneurs to grow their businesses goes beyond the need for gender equality. It makes good business sense to support women-led companies, not just for the benefit of women entrepreneurs, but for the overall growth of the city’s economy.
Thanks to Capital One’s Future Edge Initiative for supporting the “Breaking Through” study and sponsoring this post. “Breaking Through” is a publication of the Center for an Urban Future made possible through Capital One’s Future Edge initiative. Through Future Edge, Capital One works with hundreds of leading community and nonprofit organizations in NYC and beyond, including micro-finance and micro-lending organizations empowering women entrepreneurs such as Grameen America, Accion, and the Business Outreach Center Network.
Learn more at www.capitalone.com/investingforgood or join the conversation on Twitter at @YourFutureEdge #StartedByHer.