iOS app Android app More

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors
Ekaterina Walter

GET UPDATES FROM Ekaterina Walter
 

Women Launch More Companies, But They Stay Smaller

Posted: 11/27/2012 7:04 pm

Women launch businesses at 1.5 times the national rate, according to data gathered in the 2010 census. That's an incredible number, but it's accompanied by some less thrilling news: The same data shows that companies founded by women are less likely to break $1 million in revenues. There may be plenty of women-owned businesses out there, but they aren't growing.

It's worth noting that this problem is one that's seen across all types of entrepreneurs: The economy has slowed growth dramatically for companies founded by men, as well. For women, though, the problem is bigger. The lack of growth is more dramatic and may be less likely to improve with the economy.

Breaking the Growth Barrier with Capital

We can point to a variety of issues that could be preventing women from growing larger companies. Clearly, the economy has played a key role, but we need to look at other issues as well. Women have a dramatically lower rate of landing investments in their companies and find it harder to qualify for business loans. There are a number of loans and even investment funds earmarked for women-owned companies, but that hasn't brought the capital available to women up to parity. Considering that access to capital can often make the difference in a company evolving from what one person can bootstrap into an organization that can survive without the constant attention of its founder, that may be a crucial factor for women who want to break the growth barrier.

At the most basic level, that means that both investors and lenders need to see women-owned companies as less risky. There are investors who seem to be entirely gender-blind. The ideal situation is to find ways to help investors see past gender to find great underlying opportunities.

Educating Investors Isn't Enough

It's not just a question of educating investors and lenders, though. There are plenty of statistics and studies available that can demonstrate that women founders can build companies capable of providing great returns on investment (along with plenty of real world examples). But there needs to be education on the other end of things, too: Women need to know how to present a company correctly to an investor or a lender, as well as to speak to potential risk that either might worry about.

One of the big concerns about women-owned companies may sound horribly stereotypical, but if someone is going to hand over hundreds of thousands of dollars, he wants to know that the borrower isn't going to have to take off nine months suddenly, plus handle extra parenting responsibilities afterwards. It's not a concern that any lender would voice to a male entrepreneur and it's unfair to suggest that a woman is a bigger risk just because she might get pregnant at some point down the road. But from a lender's point of view, it may not be entirely unreasonable -- after all, a man who decides to become a parent isn't running a risk of being put on bed rest (or worse) as a result of complications with a pregnancy. We have to be able to address these concerns head on, even if our male counterparts don't have to. It's not enough to polish a pitch deck. It's also necessary to address any potential factor of risk that an investor or lender might not be comfortable with.

No matter what perception or challenges out there, any woman who wants to break the growth barrier needs to know why her company looks like a risk. She needs to address those risks, minimize them where possible and be willing to talk about them.

It definitely goes both ways. Investors need to be aware of their sometimes unconscious biases and women need to understand the perceptions that exist and be able to address them head-on.

 
 
 

Follow Ekaterina Walter on Twitter: www.twitter.com/Ekaterina

FOLLOW WOMEN