Women-owned businesses have made significant strides in recent years, now representing approximately 39% of U.S. businesses and generating $2.7 trillion in revenue. Between 2019 and 2023, the number of women-owned businesses grew at nearly double the rate of men-owned businesses. This impressive growth highlights the economic contributions and potential of women entrepreneurs.
However, despite these advancements, women-founded startups receive only 1.9% of venture capital funding. This discrepancy persists even though women-owned startups often generate higher returns on the venture capital they receive compared to their male counterparts. This stark contrast underscores the ongoing challenges women face in securing investment.
Gender Bias in Investment Decisions
Research consistently shows that women face significant biases when seeking investments. A study by researchers from Harvard, the University of Pennsylvania, and MIT found that investors prefer pitches from male entrepreneurs over those from female entrepreneurs, even when the content is identical. Male entrepreneurs were found to be 60% more likely to secure funding compared to their female counterparts.
This gender bias not only limits the growth potential of women-owned businesses but also hinders broader economic benefits. Increasing access to capital for women entrepreneurs could significantly boost the economy. One solution is for women to approach organizations that focus specifically on their needs. Various entities provide private small-business grants for women, and Forbes recently published a list of these grants. Additionally, many banks offer programs geared toward education and access to capital for women entrepreneurs, such as Goldman Sachs’ 10,000 Women program and the Bank of America Center for Women Entrepreneurs.
Underrepresentation in Decision-Making Positions
In the finance industry, entry-level positions are almost equally divided between men and women. However, senior roles, particularly in private equity, remain predominantly male, with women occupying only about 10% of these positions. This lack of representation in key decision-making roles contributes to a limited understanding of the unique challenges faced by women entrepreneurs. Consequently, financial products and services tailored to the needs of female entrepreneurs are often lacking.
Addressing this issue requires early intervention and mentorship. Young women need role models in the financial field to demonstrate what is possible. Organizations such as Girls Who Invest focus on transforming the investment management industry by attracting and advancing women investors and leaders. Studies have shown that gender diversity in investment teams can result in better performance, with some indicating a potential 45 basis points increase in net excess returns annually.
Promoting Financial Literacy
Financial literacy is crucial for everyone, yet many adults experience significant stress and anxiety about their finances. A 2022 FINRA study found that 56% of adults report anxiety when thinking about their finances, and 42% think about their finances daily. Young people aged 18-34 report the highest levels of financial stress.
Empowering women through financial literacy is essential. At our firm, we prioritize educating women through client relationships and networking programs. We offer informational events aimed at enhancing financial literacy among women. Numerous nonprofits also focus on this goal. The American Association of University Women, for example, provides online courses in financial literacy, salary negotiation, and other relevant topics.
Knowledge is power, and financial education enables individuals to take control of their financial health and success. Working with a trusted advisor is also a key part of this process.
Building a More Equitable Future
Empowering women financially is not just an ethical imperative; it is an economic necessity. By addressing the challenges women face in the financial realm—from career advancement to venture capital funding and financial literacy—we can foster a more inclusive and prosperous future. As a financial advisor, I am committed to championing these efforts and advocating for equal opportunities for women in finance.
