The world needs more women in business. Some recent research suggests that women-founded businesses perform better over time and deliver higher revenue – more than twice as much per dollar invested – than men-founded businesses. In addition, women-founded start-up teams create more jobs for women – they employ 2.5 times more women than all-male start-up teams.
26 million missing women entrepreneurs…
One of the reasons for the better performance of women-led businesses is that – given the higher barriers they face and higher standards they are held to – only a few exceptional leaders break through.
Too much talent is wasted. Our analysis shows there could be almost 26 million more women entrepreneurs in OECD countries if women started businesses at the same rate as core-age men (30-49 years old). This long-standing gender gap is costing economies across the world. Estimates suggest that if women participated in entrepreneurship at the same rate as men, CAD 150 billion could be added to the Canadian economy, GDP 250 billion to the UK economy, and USD 1.5 trillion added to global GDP.
This gender gap is particularly large among growth-oriented entrepreneurs and in STEM-based industries. Only 15% of start-ups seeking venture capital (VC) funding have at least one women among the founders and less than 6% are founded solely by a woman.
Inspiring women…
We need to inspire more women to take the plunge into the start-up world. An important place to start is by boosting entrepreneurial ambitions among women. Women are less likely to believe they are capable of starting a business and more likely to believe their business will fail. These beliefs are reinforced by negative social attitudes towards women in entrepreneurship. Governments can help inspire a confident, ambitious pipeline of women entrepreneurs and investors by doing more to promote entrepreneurship as a positive career choice for women. This can be accomplished by showcasing positive role models, embedding entrepreneurship curricula throughout formal education and addressing gender gaps in fields of study that are more likely to lead to innovative entrepreneurship (e.g. STEM subjects).
… investing in them…
Action is also needed to tackle the broader barriers and biases faced by women entrepreneurs, particularly in the world of finance. Women receive about 13% of government start-up funding and less than 2% of total VC investment. When women founders receive VC funding in OECD countries, on average they receive USD 4 million less investment than men (USD 9 million vs. USD 13 million).
There are a number of reasons for this. There are skills barriers. Women entrepreneurs often have lower levels of financial literacy than men. This can reduce their ability to identify funding opportunities and often weakens their pitch to investors. Governments can address this by going further to incorporate financial literacy within entrepreneurship training.
There are also gender biases in lending practices and investor preferences, due to the small number of women investors and lenders. Women account for only 12% of decision-makers at VC firms and only 2% of founding partners in the United States. Increasing these would likely lead to greater investment for women entrepreneurs since women investors are twice as likely to invest in women-founded start-ups.
Governments can step in by supporting business angel investor networks for women to invest in other women entrepreneurs. This can include subsidising the start-up and operational costs of angel networks, as well as matching investments. Governments can also provide more targeted financial support to women entrepreneurs using competitive mechanisms such as the Competitive Start-Fund for Women Entrepreneurs in Ireland and matching funding schemes such as the Boosting Female Founders Initiative in Australia.
…and backing them to succeed
Once in business, women entrepreneurs are – on average – less prepared to scale their business. Governments can provide support through coaching schemes and dedicated accelerator programmes to support women entrepreneurs. Here, public-private partnerships can be particularly valuable in ensuring they get the right advice, while working to address gender bias throughout entrepreneurship ecosystems. Here the Women Entrepreneurship Knowledge Hub (WKH) in Canada provides a good example to follow. Set up as part of Canada’s Women Entrepreneurship Strategy, includes a network of over 250 organizations, sharing research and resources with more than 100,000 women entrepreneurs.
Winning women
As our economies and societies seek to recover lost ground to the pandemic, we will need more women entrepreneurs and investors to succeed – enriching themselves and society in the process. We can and should do more to support them and to encourage a more inclusive pipeline of women founders and investors to drive the recovery.
For further discussion on policies for women’s entrepreneurship, please see the following recent publications Missing Entrepreneurs 2021 and Entrepreneurship Policies through a Gender Lens.
References
- Katie Abouzahr et al. (2018), Why Women-Owned Startups Are a Better Bet, Boston Consulting Group.
- Collin West and Gopinath Sundaramurthy (2019), Startups With At Least 1 Female Founder Hire 2.5x More Women., Kauffman Fellows.
- Government of Canada (2021), Women Entrepreneurship Strategy.
- Alison Rose (2019), The Alison Rose Review of Female Entrepreneurship, HM Treasury.
- M. Bloquist (2014), Bridging the Entrepreneurship Gender Gap: The Power of Networks, Boston Consulting Group, Boston.
- Lassébie, J. et al. (2019), “Levelling the playing field : Dissecting the gender gap in the funding of start-ups”, OECD Science Technology and Industry Policy Paper, No. 73, OECD Publishing, Paris, https://doi.org/10.1787/23074957.
- Malmström, M., J. Johansson and J. Wincent (2017), “Gender Stereotypes and Venture Support Decisions: How Governmental Venture Capitalists Socially Construct Entrepreneurs’ Potential”, Entrepreneurship Theory and Practice, Vol. 41/5, pp. 833-860, http://dx.doi.org/10.1111/etap.12275.
- Lassébie, J. et al. (2019), “Levelling the playing field : Dissecting the gender gap in the funding of start-ups”, OECD Science Technology and Industry Policy Paper, No. 73, OECD Publishing, Paris, https://doi.org/10.1787/23074957.
- Dan Primack (2020), More women are top VC decision-makers, but parity is a long way off, Axios.
- Ashley Bittner and Brigette Lau (2021), “Women-Led Startups Received Just 2.3% of VC Funding in 2020”, Harvard Business Review. [1] Collin West and Gopinath Sundaramurthy (2020), Women VCs Invest in Up to 2x More Female Founders, Kauffman Fellows.
Helen Shymanski is a junior policy analyst in the Entrepreneurship Policy and Analysis Unit at the OECD Centre for Entrepreneurship, SMEs, Regions and Cities. She is currently working on several projects related to entrepreneurship policy with a primary focus on inclusive entrepreneurship. She holds a master’s degree in Public Administration (MPA) from the London School of Economics and a master’s degree in Law, Economics and Management from the Université de Lorraine.
Mr. David Halabisky is a project co-ordinator in the OECD Centre for Entrepreneurship, SMEs, Regions and Cities. He is currently working on several projects related to entrepreneurship policy, including a multi-year project on inclusive entrepreneurship and is the main author of the Missing Entrepreneurs reports. Prior to joining the OECD, David worked for more than a decade in the Canadian Public Service where he worked on SME policy at the Federal Ministries of Industry, Finance and Labour. Mr. Halabisky has won several awards during his career, including a Best Paper Prize from the Administrative Sciences Association of Canada. He has degrees in economics from the University of British Columbia and McMaster University.