11 Surprisingly Good Facts about Women-Owned Businesses in the US
Because of my work, I spend a lot of my time reading and learning about women in business. Oftentimes, I finish those articles feeling discouraged. To illustrate the point, here are a few of the headlines I’ve bumped into recently:
“Venture Funding for Female Founders Falls”
“How These 8 Female Founders Get Customers to Have Uncomfortable Conversations”
“The Govt Can’t Ignore This Key Barrier If It Wants to Genuinely Boost Female Founders”
That’s not to say it’s all bad news, but the overall tone is not necessarily positive or helpful.
These articles really sparked my curiosity. I wondered, what is the real state of female-founded businesses in the US? How many are there? Are they successful? Are women getting funding, and if so, how? Is this media narrative serving the women leading businesses, or is it a compellingly negative approach designed to attract readers?
These questions took me on a fascinating journey through the world of female-founded businesses in the US.
In this post, you’ll learn 11 of the statistics (and insights) I learned along the way.
While digging into this topic, I read a lot of articles and used data from more than 10 sources. You’ll see all of those linked throughout this post and in the accompanying infographics.
On the whole, my research focused on national trends, so they may not reflect the reality of business in your geographic market. As you read, I’d love to hear more about your experiences as a female founder or friend of one; just leave a comment below! (I do read all of them.)
Let’s get started:
From an eagle-eye view, now seems like an excellent time to be a female founder.
Here’s the first positive indicator: there were approximately 12.3 million female-founded businesses in the US in 2018. That constitutes 40% of businesses in the US.
Even more impressive, revenues from women-owned businesses totaled approximately $1.8 trillion in 2018. This is 4.3 percent of the revenue from all businesses in the US. While 4.3% is still just a fraction, it’s a major improvement from .3% of all firms’ revenue in 1972.
If you’re thinking of starting or have already started a business, you’re in good company.
Remember that most of the statistics so far relate to all businesses operating in the US today, regardless of when they were founded. I’ll focus more on startups and funding later.
Across almost all metrics, women-owned businesses are reported to be outperforming the average from 2017 to 2018.
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The number of women-owned firms grew by 58 percent, versus 12 percent for all firms. Their employment grew by 21 percent, versus a decrease in .8 percent for all firms. Women-owned businesses grew faster than others between 2017 and 2018, at 6 percent versus 1.6 percent, respectively. And finally, the revenue of women-owned businesses grew by 46 percent, versus 36 percent for all firms.
However, you may have noticed something really interesting: while the number of female-owned businesses has dramatically, the revenue and employment of those businesses has not increased at the same rate.
When I saw that, I wondered why. Two possible conclusions came to mind (although I’m sure there are more explanations):
Even though women are feeling more confident starting businesses, those businesses might not have huge growth potential.
If those businesses do have under-realized growth potential, perhaps female founders don’t have the support or resources they need to reach it.
Again, those are just two explanations I considered. Let me know if you think that difference matters, and what factors you think could be driving it in the comments.
47 percent of all women-owned businesses are owned by women of color!
Keep in mind that women of color account for around 40 percent of the total population of women in the US.
When considering only new women-owned businesses, those figures look even better.
Between 2017 and 2018, an average of 1,821 new women-owned businesses were launched every day.
Around 1,162 of those were owned by women of color, or 64 percent.
20 percent of all women-owned businesses are owned by African American women. Seventeen percent of all women-owned businesses are owned by Latina women.
That said, the revenue gap between businesses owned by minority and non-minority women is wide and appears to be getting wider.
In 2018, the average revenue of a business owned by minority women was $84K, while the average revenue of a business owned by non-minority women was $212K.
That’s a big disparity. That the numbers make it clear that we have a long way to go in helping women of color succeed in business. Without research and data on this topic, there’s no way the industry can understand the need to shift our approach to supporting female entrepreneurs of color.
As a late-twenties founder myself, I was interested in learning what percentage of female business owners were my age. Turns out that only about 13 percent of female business owners are between 25 and 34, and another 17 percent are between 35 and 44.
The largest age bracket for female business owners was 55 to 64 years old, at 26 percent. Around 19 percent of female business owners are 65 or older.
I was pleasantly surprised, because that doesn’t really align with my stereotype of female business owners.
The knowledge that most female business owners are over 35 seems affirming; it shows that you can be a successful female business owner at any age. On the other hand, it may indicate that women must stay in the workforce longer, due to their financial situation and other factors.
However, if you’re in tech, age (and the accompanying wisdom) may not be to your advantage. Age is the highest cited bias perceived from investors in the tech industry, according to founders.
Some research indicates that more than 62 percent of women rely on their business as the primary source of revenue.
As we think about women in business, it’s important to remember that it’s not all side hustles. Even though that’s an exciting area of entrepreneurship, lots of women are supporting themselves, their families, and their communities with their work.
In general, the number of employees per business is on the decline nationwide, and this trend is reflected among women-owned businesses.
The average woman-owned business in 2018 employed less than one person (0.7) - including the owner.
This means that a lot of those women-owned businesses are actually teams-of-one. This is a powerful and under-recognized segment in the conversation about women in business.
Approximately 90% of all women-owned businesses are sole proprietorships.
As we think of ways to serve female business owners, it’s essential to understand what those businesses look like and how to help them grow.
Conventional wisdom says that companies need employees to grow, so these numbers might indicate a market risk. But is that really true in 2019? Do female founders and small business owners really need to have employees, or are there more efficient and more human ways of helping those empowered solopreneurs grow their clientele and their revenues?
Here at The Lane Collective, we’re answering that question by providing an alternate route to revenue growth and success to female founders and the women who serve them.
Our vision is to create a network of highly skilled professionals who serve future-focused businesses, through this Collective concept. Every expert maintains their own autonomy and continues to build their own brand, while also collaborating and experiencing the benefits of revenue-sharing.
We’ll be talking more about this as we evolve. If you’re a female business owner looking for the support of a network of marketing, branding, investing, and operations experts, send me a note to hello@lanecollective.com.
If you’re one of those expert professional service providers, get in touch and I’ll send you over a deck explaining the concept and how you can join.
Of course, the money matters, and most women-owned businesses are not yet making six figures.
Around 88 percent of women-owned businesses generated less than $100K in revenue.
Just five percent of women-owned businesses generated between $100-249K in revenue, and just under two and half percent generated $250-499K. Women-owned businesses generating $500-999K and businesses generating more than $1M in revenue accounted for just 1.6 and 1.7 percent of all women owned businesses, respectively.
Across all revenue brackets, the growth rates between 2007 and 2018 look healthy.
Businesses under $100M in revenue are growing at a rate of 56 percent, while even the largest companies are growing by more than 42 percent year-over-year.
There are three major challenges that women business leaders face, according to the US Chamber of Commerce:
Lack of Funding
Lack of Self-Confidence
Market Saturation
Funding is a big challenge for startups and small businesses, regardless of the gender of the founders and owners. Cash flow, access to credit, and access to venture capital are all hurdles for business owners. That said, the challenge is greater for women, and particularly women of color.
For context, it’s worth noting that around 22% of all startups are founded by at least one woman, according to some studies.
Just 2.2% of venture capital went to female-founded startups in 2018.
If you’re asking why the disparity is so clear, you’re not the only one. Many point to the fact that 92% of partners at VC funds are men.
Others note that female-founded companies tend to be based on solving problems they have experienced, and men sometimes struggle to understand the need - or value - of a solution to gendered pain points.
Keep in mind that the 2.2% does equate to billions of dollars in VC funding; that is a lot of capital, even if it’s just a fraction.
So far in 2019, more than $20 billion has been invested in female-founded and co-founded startups globally.
Around a quarter of that, or $5B, of that went to startups with only female founders or co-founders, while $15B went to startups with male and female co-founders. (Remember, these high-level numbers about funding are global.)
In 2018, businesses with female founders and co-founders attracted more than $44B in venture funding. Compare that with 2014, when the amount was just under $10B.
This year, female-founded and co-founded companies gained 16 percent of both Series A and Series B investment dollars.
Even though the number of women getting funding for their startups is increasing, women are underrepresented when it comes to getting funding for their businesses.
Hat’s off to Crunchbase for this great analogy:
Imagine that a venture capitalist has $100 to invest. Only $2-3 are going to female-founded startups, while $10 are going to startups with both male and female founders. The remaining $87 would go to startups with only male founders.
Gulp. Additional studies back this data up.
Other research shows that, for every $1 men raise in the early stages, women raise $0.37, and black women raise only $0.02.
That data comes from the Jane VC Founder Survey; I’ll talk a little more about them later.
The only place I’ve seen where this funding disparity does not hold is in late-stage funding rounds for companies with women in leadership positions. Startups with at least one female founder raise 21% more funding than those with all male-teams in late-stage funding rounds.
It’s a bit surprising that there is such a disparity in access to funding, particularly as research shows that women-led companies tend to perform better than those with mostly male leadership.
From 2002 to 2014, companies in the Fortune 1000 with female CEOs tended to generate 3x the returns of S&P companies led by men.
Of course, these aren’t small businesses or startups; these are some of the biggest companies in the world. The data seems to hold true even for smaller and early-stage companies.
A 2018 study by Boston Consulting Group found that women-founded startups produce 2x the revenue.
From where I’m sitting, these performance stats do help show that women in leadership are more likely to be an asset than a liability.
Luckily, there is a new wave of venture capital firms focusing on serving the needs of female-founded companies.
In 2018, there were 87 funds focusing in women-founded and co-founded companies.
Twenty seven of those funds were launched in 2018.
These funds have raised more than $2.2B in capital to invest in women-led startups.
More than two thirds of these are first-time funds, which means it is the first fund led by a given team with a focus on investing in women. These funds tend to employ primarily women, as well.
This means more opportunities not only for women business leaders, but for women in finance. Not only is it a great time to be a female founder, it’s a great time to be a female investor.
Jane VC is one of those funds focusing on investing in women. It’s a venture capital firm founded by female operators and investors with ties to Stanford.
Another fund, called Backstage Capital, invests in all underrepresented groups of founders, but is focusing its efforts on black women.
Cleo Capital is empowering women to get involved in VC a different way; they activate female scouts, who are responsible for finding the next big opportunity for the fund to invest in.
If you’re a female founder interested in VC funding, you’re fortunate to have a lot of targeted options designed just for you.
Venture capital isn’t the only available route to capital for female business owners. Getting a small business loan from a bank or other financial institution is an option. If you’re a female founder, you can also explore alternative lending.
Since funding remains the biggest challenge for women-owned companies, expect more articles and resources focused on this topic in the future. If you’re seeking funding - or would like help seeking funding - know that we would love to assist.
We know that community plays a big role in helping all business leaders be successful. However, men tend to feel more supported by the startup, venture, and entrepreneurship communities than women do.
Sixty seven percent of men feel supported by the entrepreneurial community, while only 48% of women do.
TLC is growing to provide the support, mentoring, professional resources, and eventually, capital needed to help female business owners grow.
If you want to learn more about collaborating, please send a note to hello@lanecollective.com. Or, you can always subscribe to stay in the loop.
And finally, here is a free (and recently updated) resource to help you with marketing and growing your business:
