The growth of women owned businesses in New York City is skyrocketing. A new study, “Breaking Through: Harnessing the Economic Potential of Women Entrepreneurs” by The Center for an Urban Future, explores the impact of women-led companies on economies across the country. The comprehensive report, supported by Capital One’s Future Edge initiative, states that the number of women-owned businesses in New York between 2002 and 2012 grew by a colossal 65 percent or 45 new businesses every day. This added more than 56,000 jobs and $3 billion in payroll to the city’s economy. In fact, New York has far more women- owned businesses than other major cities in the United States.
These new businesses span all business sectors, but of particular interest is technology. In tech, the number of women-founded startups has exploded in recent years. A 2014 study by Endeavor Insight found that the number of New York City tech companies with female founders has grown tenfold since 2003.
The Center for an Urban Future report states that “women are starting a greater share of the tech companies in New York than in Silicon Valley and Boston, the nation’s other leading tech hubs.” Although men still launch more tech companies overall than women, women make up a larger share of tech entrepreneurs in New York than in other leading tech hubs. In the third quarter of 2015, a higher percentage of companies receiving venture capital in New York City had a women founder than in Boston or San Francisco.
Why do we see this growth in New York and what are the opportunities and challenges for women entrepreneurs in this city?
According to the interviews conducted for this report, New York offers many advantages to women founders in tech.
First of all, the city provides a welcoming environment. Kathryn Minshew, co-founder of The Muse states, “In my experience, New York has been a much more welcoming and hospitable environment than the Bay Area.” Minshew started her company in New York in the fall of 2011, then moved the company to the Bay Area. After eight months on the West Coast, Minshew moved back to New York in the fall of 2012. “I felt New York had more of a community of women entrepreneurs helping each other, and more industry diversity, including areas where women held position of power, like media and fashion. It’s a more support ecosystem for women entrepreneurs whereas the tech community in the Bay Area feels more homogenous.”
New York offers other advantages as well. The size and scope of its economic base and its global influence in the fashion, media, beauty, and retail industries offer great opportunities for innovation. Women with experience in these industries are now helping companies move into the digital age. Women are also increasing their presence in biotech, health tech, financial tech, as well as the service industry.
Despite the environment for women founders in tech, there are still formidable challenges that affect women entrepreneurs everywhere. These challenges are no different in New York and prevent businesses with great potential from growing and contributing more to the city’s economy.
These challenges are cited in the Center for an Urban Future report.
Women entrepreneurs struggle to raise capital.
Starting a tech company is traditionally less expensive than other startups, yet women founders still attract less money than their male counterparts. The report cites data that “16.9 percent of New York City companies receiving VC funds in the third quarter of 2015 had a female founder, but companies with a female founder accounted for just 8.7 percent of the total VC funds received that quarter—$122 million out of $1.41 billion.”
Another contributing factor that explains why women founders attract less funding is the fact that of the top 20 most active venture capital firms in the city, just 11 percent of the investment teams are women. It has been traditionally much more challenging for women to receive funding from male dominated firms.
Banks are not always inclined to invest in new small business ventures. They are risk averse when it comes to investing in new businesses due to the high rate of failure and because they earn considerably less profit on small loans. In order to qualify for bank loans, small business owners must provide a business plan, credit history, cash flow projections, collateral and often guarantees. For many women, this can be an insurmountable hurdle especially if they are first-time entrepreneurs and have never written a business plan or had to make financial projections. Even with SBA loans, which were created for business owners who may have trouble qualifying for a traditional bank loan, women end up with fewer loans and less money than their male counterparts.
Women entrepreneurs have limited access to networks and connections.
Networks are a critically important for entrepreneurs in order to learn more about their industry and build important connections for additional resources and business growth. It is challenging for women to find the connections they need when starting their business and later on when they are seeking mentorship for business development. For first time entrepreneurs especially, networks provide a safe haven to learn the rules of the game. They are great source of connections for new business.
Women in the city complain that many of these networks are frequently tight-knit clubs where personal and business connections go back years. It’s tough for newcomers and especially women to be accepted. Women feel they have to work harder to develop relationships and demonstrate that they belong.
Women entrepreneurs lack business and financial skills.
Many of the women entrepreneurs interviewed for the report cited their lack of basic business and financial skills when they initially started their businesses. They had little if any experience in accounting and risk management, legal, tax and regulatory compliance, sales, marketing, and the use of technology. Even women who have the business skills and/or corporate experience cited the need for training in areas like strategic planning as well as hiring and evaluating personnel.
Women entrepreneurs lack role models and mentors.
Even if you have experience in the industry maybe you never started a business before and therefore, lack the aforementioned business and financial skills. Maybe you’ve never started or owned a business in New York before and you need to learn how to navigate starting a business in the city. Role models and mentors are invaluable for new business owners. Without solid networks and connections, it is difficult to find qualified people who are willing and able to fulfill this need for women business owners. Leaning on more experienced business owners is especially helpful for women who are just beginning the entrepreneurial journey, and for those who face challenges growing their businesses.
Women fight their internal demons.
Women’s self-doubt and lack of confidence affect their ability to pitch their business to attract funding. They are less likely ask for enough capital for and not as willing to take risk. A lack of confidence therefore holds them back from starting and growing a viable business. Role models and mentors as well as strong network connections when available can help women build their skills and subsequently their confidence.
Women entrepreneurs have to work harder be taken seriously.
Women encounter gender bias and stereotypes when they are pitching for funding and new clients or when they are hiring engineers.
The study refers to this issue. “While the tech community lionizes 20-something men in hoodies, for women, youth and gender can be a double negative. Hodak and Kaupe, whose company ZinePak counts Walmart and American Express as clients, encounter skeptics at least once a week. A senior vice president of a Fortune 100 company, for example, told them that he was sure one of their fathers was a Walmart executive since he didn’t believe they could have landed the retail giant as a client on their own. ‘Five years into running this business and we still have to put up with that,’ says Hodak of ZinePak.”
Whether it’s inappropriate questions or remarks, the reality for women is that they are constantly required to prove themselves.
How can New York support the surge of new tech startups by women and support their potential growth?
The report suggests that there is a need to increase the number of women working in the tech sector. “While the number of female tech entrepreneurs is growing rapidly, it’s likely there will be significantly fewer women entrepreneurs in this part of the economy until women comprise a larger share of those working in the city’s tech sector. Mayor de Blasio, philanthropic foundations, and industry leaders should expand upon several of the promising efforts already underway that help girls and women—and other groups historically under-represented in the tech sector—develop the skills and credentials needed for tech careers.”
Any effort to assist women founders in tech to grow their businesses and thrive in the city goes beyond the need for gender equality. It makes good business sense to support the huge influx of new women-led tech companies and not just for women entrepreneurs. Existing businesses across different sectors such as fashion, retail, beauty, health care, financial tech, and biotech will benefit from increased innovation, and as a result, the city’s economy will prosper.
Thank you Capital One for sponsoring this post. This study was made possible through Capital One’s Future Edge initiative, a $150 million, five-year effort to help more American workers and entrepreneurs succeed in the 21st century economy. Through Future Edge, Capital One works with hundreds of leading community and nonprofit organizations in NYC and beyond, including microfinance and micro-lending organizations empowering women entrepreneurs such as Grameen America, Accion, and the Business Outreach Center Network. Learn more at www.capitalone.com/investingforgood _or join the conversation on Twitter at @YourFutureEdge._
This article was written by Bonnie Marcus from Forbes. This reprint is supplied by BNY Mellon under license from NewsCred, Inc.
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Bonnie Marcus, Contributor