The newest generation of business owners span the spectrum of industry. Their businesses are as diverse as their owners. Businesses owned by women of color have more than doubled since 2007, increasing by 2.8 million. Nearly 8 out of every 10 net-new women-owned firms launched since 2007 were started by a woman of color.

The expansion from 2007 to 2012 fueled job creation as well. While the number of overall firms with paid employees dropped by 5.4% in that time period, women-owned firms with paid employees increased by 13.9%. In terms of revenue, women-owned businesses grew in double digits for all categories, outpacing the numbers for all firms overall. All firms with $1 million in revenue — a major standard for business viability — decreased by 1.7%, while women-owned firms in this category increased by 21.4%.6 Thus, by any metric, the last decade has truly been an era of women’s business expansion.

We know, however, that these numbers do not tell the whole story. More recent, but not federally released, data, like the American Express OPEN 2016 State of Women-Owned Business Report, estimates that there are more than 11 million women-owned businesses employing nine million Americans and generating $1.6 trillion in receipts. That translates to a 45% growth in the number of women-owned firms since 2007, or roughly five times the rate of all firms. The failure to capture proper data on a critical segment of the economy prevents policymakers from properly addressing the challenges business owners face in furthering their companies and creating jobs. As will be discussed, women business owners have almost unlimited potential for continued growth, but significant barriers still remain. Without updated figures from the US Census Bureau, it is difficult for Congress, the Administration, or even advocates like AWBC to quantify just how much growth is happening, in what industries, and how to further foster an environment for women’s entrepreneurship.

Today, women own more than 35% of all businesses. According to a recent study, in 2016 the rate of women entrepreneurs saw the biggest increase in almost two decades. Incredibly, every month, 260 out of every 100,000 women chooses entrepreneurship.  From the perspective of our centers throughout the country, we know one thing to be true: demand from women for entrepreneurial training abounds.

Unlocking Potential by Addressing Barriers to Entrepreneurship

The economic potential in women-owned businesses is astounding. Researchers and economists speculate that if women started businesses with the same amount of capital as men, they could create 6 million jobs in 5 years. They have also found that if women were fully engaged in their businesses, it would raise Gross Domestic Product (GDP) by seven percentage points. More than theoretical, evidence shows that women-led tech companies, when venture-backed, bring in 12% higher revenue than similar male-led companies and have a 35% higher return on investment. 

Yet women-led companies are less likely to receive venture capital (VC) funding, just one example of why one of the most damaging barriers to women’s entrepreneurship is access to capital. Research conducted on behalf of the National Women’s Business Council (NWBC) indicates that women start businesses with roughly half as much capital as their male counterparts.

Women receive just 7% of venture capital funds and less than 5% of conventional business loan dollars, despite making up more than a third of all businesses. At the U.S. Small Business Administration (SBA) flagship 7(a) lending program, only 17% of loans go to women-owned firms. Seeking capital outside of traditionally conservative banks, women fare no better. They are one-third as likely to access equity financing through angel investments or venture capital. Shockingly, this gender gap is growing worse. While venture capital firms with women partners are more than twice as likely to invest in companies with a woman on the executive team, the total number of women partners in venture capital firms has declined significantly since 1998, dropping to 6% from 10%.

The declining number of women decision makers in the venture capital community leads to a decline in dollars invested in women-owned firms, though all attitudes appear to negatively skew female-led pitches. A study led by Alison Wood Brooks of Harvard Business School revealed that both men and women are more likely to be positively influenced by a business pitch if it is delivered by a man — even if the exact same words are spoken by a woman. Another barrier to capital is the fact that women, at 5.5%, are less likely to access networks of close friends and acquaintances in search of funding compared to their male counterparts who do so at a rate of 22.7%. Crowdfunding seems to be just as difficult. Researchers at Berkeley looked into the gender dynamics of crowdfunding and found that male investors are just as likely to prefer male-led ventures is this realm as well. The researchers found that, "while more than 40% of the funds of female investors were invested in projects by female entrepreneurs, only 22.5% of the male investor funds went to female-led projects."

Limiting the flow of capital to women-owned businesses is a missed opportunity financially. The VC firm First Round Capital found that their investments in companies across a wide range of industries which had at least one female founder performed 63% better than their investments in all-male teams, according to a report released last year. When Shark Tank’s Kevin O’Leary did an audit of the 32 companies in his private portfolio, he noticed a pattern: all of his returns were coming from companies either owned or run by women. 

And yet stories of entrepreneurial success tend to be male-dominated, which hinders women entrepreneurs and incorrectly frames a narrative in the media that men are better at starting businesses than women. Government leaders can help deconstruct the false narrative that only men are successful entrepreneurs by lifting up stories of successful women entrepreneurs. The stories of successful women entrepreneurs must be showcased, as they are role models to women business owners. Today’s hearing is a good example of how this can happen.

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