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Maximizing Dividends from Female Entrepreneurs

Jonathan Ortmans on July 07, 2014 Source: Policy Dialogue on Entrepreneurship

 female developer

Those of us living in the United States are reminded each Independence Day of the many blessings we enjoy in terms of equality and individual liberty. The level of cultural capital for entrepreneurs is obviously linked to a nation’s cultural norms, stigmas and role models – or lack thereof. Nowhere is this more evident than in the world of female entrepreneurship where unaddressed challenges allow women’s creativity, problem-solving capacity and even key science and technology skills to lay idle in our societies.

In the developing world alone, there are 812 million women who have the ability to contribute more fully to their economies as workers and employers, according to the International Labor Organization (ILO).

This untapped economic potential also occurs in mature markets. Even when women have the skills for high-impact ventures, the lack of strong networks dwarf their growth. In a new study by the Global Entrepreneurship Development Institute (GEDI) released at the recent Dell Women Entrepreneurs Network (DWEN) conference in Austin, Texas, more than 75 percent of the 30 developing and developed economies surveyed failed to meet fundamental conditions necessary for female entrepreneurs to prosper.

According to entrepreneur, author, researcher and fellow thinker Vivek Wadhwa in a piece in the Times of India, there are hardly any women board members of technology companies in India and most have no senior women executives at all except in Human Resources. I highly recommend picking up a copy of Wadhwa’s latest book Innovating Women available in print, as an eBook, and as an audiobook which, while not being released until September 2, is available now for preorder on Amazon. Through essays from the likes of Google [X]’s Megan Smith, venture capitalist Heidi Roizen, Patriarch Partners CEO Lynn Tilton, entrepreneur and technology executive Kim Polese, and one of the first woman in space, Anousheh Ansari it is certain to inspire more women to step up and fulfill their potential. (All proceeds go towards women startups).

Another stark report comes from an Organization for Economic Cooperation and Development (OECD) 2013 report showing several other important gender gaps in entrepreneurship that are still visible including that:

  • Men are three times more likely than women to own a business with employees;
  • Women rarely own large businesses, reflecting the composition of their professional networks, and their low levels of initial capital and bank financing;
  • Women’s average earnings from self-employment are up to 60 percent lower than for men; and
  • Competitive disadvantages for companies owned by women translate into lower levels of labor productivity that are 5 to 30 percent lower than those of companies owned by men.

This OECD report offers examples of policy initiatives that might improve access to credit, as well as training and awareness, all of which can all help unlock what it calls “the double dividend of women’s entrepreneurship”: higher empowerment of women and more productive businesses. I suspect that there are even more dividends - making their businesses more innovative, the encompassing of environmental and social solutions, as well as the increase in size of a larger seed capital and mentorship pool, as successful women entrepreneurs join the ranks of investors.

In the United States, women entrepreneurs get just 19 percent of angel funding and about 6 percent of venture capital, hurting their companies’ chances to scale. Interestingly, a new study shows that this might be in part because there are fewer women investors in those forms of early-stage investing. For example, only about 10 percent of VCs and 22 percent of angel investors are women, says the study titled "Gender Dynamics in Crowdfunding," co-authored by Dan Marom, Alicia Robb, and Orly Sade. By contrast, women's odds of successfully getting funded are actually slightly superior to men's in the crowdfunding platform Kickstarter, where there are more female investors than in other funding arenas.
 
The World Bank points to access to technology and the internet as the most important strategy to unleash opportunities for women, allowing them to gain valuable knowledge, to connect with markets and establish sustainable networks. According to the “Women and the Web” report by Intel, UN Women and the State Department, doubling the number of women online from 600 million to 1.2 billion could potentially add from US$13 - 18 billion in annual GDP across 144 developing countries.

The Obama Administration has also been seeking ways to make women more interested in entrepreneurship as a career option and more confident in their capacities as entrepreneurs, even in areas traditionally confined to men. At the recent White House Maker Faire, the President called for women to lead a grassroots renaissance in American manufacturing. Among the partnerships to allow women to have access to tools needed to bring their ideas to life are:

  • The Maker movement, which is calling upon more than 125 libraries and library systems across the country for support. Among them, the Chicago Public Library Maker Lab, for example, will focus on increasing participation and inclusion of women in the movement.
  • Brit + Co., an online media and e-commerce platform that provides tools to inspire and enable creativity, is launching an effort to help more women and girls pursue their passions and become Makers. This will include a large-scale yearly ‘Makeathon’ conference to get more women engaged in industrial design.

Policy levers to unleash women’s entrepreneurial success are many. However, better data and research analysis are vital now for smarter policy design and implementation. Much is still unknown about which policy instruments work in raising high-impact entrepreneurship rates among women.

To begin to address this data and analytical gap, the Global Entrepreneurship Development Institute (GEDI) adopted a holistic approach and evaluated 30 economies across mature and emerging markets, scoring each of them on business and gender-specific issues, and how they impact the growth of "high-potential" businesswomen. Funded by Dell, this project created a unique composite index, called the “Gender GEDI”, to serve as a diagnostic tool for measuring a country’s strengths and weaknesses over time in terms of providing the favorable conditions that enable businesses founded by women to thrive. Here are some of GEDI's key findings:

  • The top ranking countries are the United States, Australia, Sweden, France, Germany, Chile and the United Kingdom. These top performers tend to have a good overall business environment, and the report recommends that they implement support programs to activate the growth of high-potential women entrepreneurs.
  • Mid-tier countries would benefit most by targeting aspects affecting the entrepreneurial environment, such as leadership training and improving access to finance capital.
  • At the bottom of the ranking were Uganda, Egypt, Bangladesh and Pakistan. These bottom-tier countries would benefit most by addressing aspects affecting individual attitudes, namely the social and cultural norms that restrict women's business development, through improved access to education, equal property rights, and banking.

"Only 37 percent of all entrepreneurs in the United States are women. In Europe, the percentage is even lower, at 25 percent,” said Ruta Aidis, project director of Gender GEDI. Nonetheless, the report focuses on quality and not quantity of female entrepreneurs. The executive report is available for download from the Global Entrepreneurship Library.

We are past the stage where the policy rationale for the development of women’s entrepreneurship is focused on women’s equality and empowerment. However, as I counted my blessings this Fourth of July, I was reminded that improving the ranking of those bottom tier countries in the Dell Gender GEDI study was about many of the same principles we celebrate each year on the Fourth of July -- access to education, equal property rights, and economic freedom. It is high time we figured out as nations which levers to pull in order to welcome more women into the global pool of entrepreneurs, startup investors and mentors.

[image credit: Marta Manso, Flickr]

Category:  General  Tags:  Dell, DWEN, GEDI, Gender GEDI, Ruta Aidis, Alicia Robb

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