Women have been growing and flexing their muscle in building the US economy, becoming entrepreneurs by the thousands. However, when it comes to raising capital, it’s a different story.
Women are doing their part to grow the economy in the United States, but the venture capitalists support to this point has been lacking. Every day in America, women start more than 1,200 new companies, according to the 2013 State of Women-Owned Businesses Report by American Express OPEN. This is double the rate from 2011. There are now 9.1 million women-owned businesses in the U.S. These firms generate more than $1.4 trillion in revenue and employ more than 7.8 million people, according to the American Express report.
These are all encouraging statistics until you find out that women-owned or led companies receive less than 12% of investment funding. Whether overt or covert, this is an obvious discrepancy, however, it does not mean that it cannot be fixed. Women-led businesses are not only flourishing, they are doing it among a diverse range of industries. Women-owned firms now lead growth in eight of the top 13 industries, reflecting a continued diversification. Sectors where women-owned firms are leading growth include real estate, finance/insurance, and wholesale trade.
So how are women funding the companies that they are starting? When asked about the types of financing used in 2009, 63% of National Association of Women Business Owners (NAWBO) members responded that they used credit cards, 13% used a commercial or bank loan, 11% used a personal bank loan, and only 2% used equity capital. http://nawbo.org/content_10354.cfm This puts these companies at a serious financial disadvantage in an already difficult space. If more of these companies were able to secure venture capital funding or participated in accelerator programs, it would greatly increase the chances of these businesses surviving in the long run.
Startup accelerators possess the tools and resources necessary for young businesses to thrive and would serve as a great asset to women entrepreneurs.
Accelerators serve as a short-term booster for a startup, providing mentorship, funding, and office space to assist the growth of the company. These accelerators usually last around 3-6 months, during which time companies undergo rigorous training with their mentors that leads to a “demo day” at the conclusion of the program. This provides an opportunity after all the beneficial training the insight the companies received to present in front of a group of investors and take the dreams of their business even further. This is the kind of experience that could have wide ranging benefits for women entrepreneurs.
Creating accelerators will help establish a long-term knowledge base for women who are starting business. These are the leaders that will help the next wave of entrepreneurs get their feet in the door. Accelerator programs are very competitive and that could be part of the reason that less established female business leaders are not able to make it over the hump and get into these programs. The need for a women-focused accelerator exists and some organizations are looking to provide just that.
Prosper Startup Accelerator is looking to address this need in the St. Louis region. Prosper Startup Accelerator was created to address the entrepreneur gender gap in the region and seeks to ensure that the St. Louis community is well positioned in the new economy and, more specifically, that women entrepreneurs are a vital part of its future.
The disparity that exists in venture capital funding for women led business is very solvable, but requires a commitment to getting the ball rolling in not only in funding, but accelerators and grants as well. Women have shown that they are more than capable of leading profitable business and it is time to take their unique perspective and insight to the next level by providing more support.
About the Author:
Dr. Mary Jo Gorman, founder of Advanced ICU Care, is a nationally recognized entrepreneur who has successfully founded and grown three companies with two successful exits. As Chairman of the Board and CEO of Advanced ICU Care, she raised millions in venture funding and grew the company to be the largest provider of tele-ICU services in the country. She was recognized by EY in 2011, as one of ten “Entrepreneurial Winning Women.” As a member of Golden Seeds Angels, she has reviewed, advised and actively invested in early-stage companies. She has applied her experience by serving as a judge for both EY’s Winning Women program and the Dutia-Grewal Global Impact Award. Dr. Gorman serves on the Investment Advisory Committee of the BioGenerator, which has invested in over 40 life science startups, as well as on private and non-profit boards in a variety of capacities.
Dr. Gorman received her MD degree from Southern Illinois University School of Medicine, her MBA degree from the Olin School of Business at Washington University in St. Louis, and her BA degree in chemistry and biology (cum laude) from Saint Louis University. She obtained her board certifications in Critical Care Medicine and Internal Medicine.