In the United States, a growing number of women are starting their own businesses and becoming entrepreneurs. Between 2007 and 2018, the share of women-owned businesses across all sectors increased from 29 to 40 percent. But women entrepreneurs still face key obstacles in starting and scaling their businesses. Especially in the tech industry.
Women entrepreneurs continue to be under-represented in the tech industry. In 2017, Crunchbase reported that only 17 percent of US-based technology start-ups had a female founder, a proportion that has remained stagnant since 2012.
That picture is not unique to the United States. The 2016/2017 Global Entrepreneurship Monitor report shows that in 74 countries fewer than 2 percent of women entrepreneurs are starting information and communications technology (ICT) businesses, compared to 11 percent of male entrepreneurs.
Women-owned businesses also tend to be smaller in size and receive less funding.
To gain a deeper understanding of challenges women face in the technology sector, the Georgetown Institute for Women Peace and Security (GIWPS), in partnership with the Mulan Foundation in China, has launched a comparative study of women entrepreneurs in the United States and China.
Based on initial survey results and in-depth interviews conducted in the United States, we highlight three emerging findings from our study which will be presented at the annual Global Mulan Forum for women’s entrepreneurship in Beijing, China this week.
1. Accessing capital is a key obstacle to starting and growing a business
Accessing capital is a key obstacle faced by women entrepreneurs, both in the start-up and growth phases of their businesses. Over half of respondents used personal savings as their primary source of initial funding. Among our survey respondents, over 70 percent listed “applying for a loan” and “accessing capital from angel and seed investors” as one of their top three challenges.
For many women, the lack of collateral associated with a nascent technology company made it difficult to qualify for a loan. As one woman founder explained, her start-up had no “inventory or other company assets to pledge” and therefore she had to “personally guarantee all loans with private assets.”
Few women cite angel, seed funding and venture capital as their primary source of funding, both in the start-up and growth phase. However, this may be partially due to preferences: a number of women expressed hesitancy in pursuing equity-financing opportunities, as they did not want to hand over control of their business to others.
2. Access to mentors and networks can help overcome challenges in the post-start-up phase, especially in expanding customer markets
Mentors and networks can help women entrepreneurs overcome challenges related to accessing new markets and customers.
Phyllis Newhouse, founder and CEO of Xtreme Solutions, Inc., recounted how, after the first 18 months of rapid company growth, she came up against many unfamiliar “roadblocks”—including systems failures and new process technologies. Soon after, she was introduced to a more established female entrepreneur in her field who became her mentor. Newhouse says that mentorship helped Xtreme Solutions almost double its revenue in the following year.
Despite the benefits many women ascribe to having a mentor, only one-third of survey respondents said they themselves had a mentor when starting their business.
3. Many women face self-doubt and biased perceptions of their abilities as entrepreneurs
Many women described low self-confidence, particularly in the start-up phase of their business. Survey respondents said they doubted their “ability to run a business,” and “constantly questioned” themselves.
Claudia Mirza, CEO of Akorbi, noted that the common feelings of self-doubt among women entrepreneurs can hinder them from taking financial risks—which are key to grow a business. Kathryn Petralia, cofounder of Kabbage, similarly noted that women “are a little less comfortable taking risks they aren’t 100 percent sure they can manage”—something that men “do all the time.”
Women also say they face gender bias, particularly when seeking external funding. Christina Seelye, CEO and founder of Maximum Games, said she perceives a strong “luck bias” toward thriving female entrepreneurs, where their success is attributed to chance rather than their own skills and business savvy.
Women entrepreneurs also described a double standard in how their confidence or ambition may be perceived by others. As one survey respondent noted, “I am always shocked at the audacity of some peer entrepreneurs (generally male) when describing their business successes, pitching products, or asking for funding or mentorship. I’m also shocked at how positively their confidence is received. I have not found that an overly positive presentation of myself or my company’s capabilities is seen in a favorable light.”
Seelye described a similar double standard in how male versus female ambition is perceived. “With women who have a really aggressive [business] plan,” Seelye said, “[funders] look at that as reckless, versus when a man has an aggressive plan, they’ll look at it is as ambitious.”
Women entrepreneurs play a critical role in the US economy.
As technology increasingly drives the new economy, we need to address the challenges faced by female founders of tech companies. These emerging results from Georgetown underline the importance of addressing negative gender stereotypes and increasing access to capital and networks as key levers to expanding access to new markets and customers and promoting a favorable business climate for women entrepreneurs.
By Ambassador Melanne Verveer and Yvonne Quek, the Clinton-McLarty research fellow at GIWPS and co-author of Women Entrepreneurs: Starting and Scaling Technology Businesses in the United States