Why women don’t see selves as entrepreneurs
For many Americans, starting their own business is the manifestation of the American dream: Take a risk, work hard, get rich. So why don’t more women do it?
Women, despite being about half the labour force, own 36 per cent of companies in the United States. Those who do own companies are half as likely as male founders to employ anyone other than themselves, and they generally earn less in revenue, according to census data analyzed in a new report by Third Way, a think tank. In technology, fewer than 10 per cent of startups are owned by women, according to another new paper, by researchers at Harvard.
The reason, according to the research: People with experience mentor and give money to people like themselves, while those starting out do what they see people like themselves doing. In other words, we all live in bubbles — not just in our politics or our friendships, but also in our careers — and this shapes the ideas we form. Social scientists describe the phenomenon as homophily, or love of the same.
“Women are just outside of those established networks, and if you’re outside the networks, you don’t get the knowledge, you don’t get the opportunities, you don’t get the contacts and you don’t get the funding,” said Susan Coleman, a business professor at the University of Hartford and co- author of the Third Way report. She wrote it with Alicia Robb, a research fellow at the University of Colorado, Boulder, and the founder of Next Wave Ventures, for female angel investors.
Research s hows t hat women around the world are less likely to consider entrepreneurship as a career path, largely because they don’t see other women entrepreneurs as role models.
They’re also less likely to have the management experience that can lead to starting a company. Just 19 per cent of top executives are women, according to a LeanIn.org and McKinsey report, and a main reason they don’t rise is because they are less likely to have mentors in senior leadership.
That changes when women run companies. The gender pay gap shrinks, and women are more likely to be promoted, according to research of public companies by Linda Bell, an economist and provost of Barnard College. “Whether by cause or effect, the presence of a top woman executive has a really robust impact,” she said.
Women are also left out of financing networks, which are predominantly male and often operate through referrals from friends. They are more likely to invest their own money instead of outside capital in their businesses, and when they seek investors, they ask for less.
Another factor could also be at play. Women are generally more risk- averse than men. Jennifer Dionisio said she had no female role models when she started her company, Three Sisters Farm and Dairy, last year. She sells goat milk and beef, and she hopes to start a cheese shop and farm-to-table restaurant.
Living in a small town, Pueblo, Colorado, made it easier, she said, because she knows the local lawyer and bankers. “I would be apprehensive if I didn’t,” she said.
Silicon Valley is even more of a bubble than the rest of small-business America.
Founders of startups financed by venture capitalists are almost all male and white or Asian, according to a study by Paul Gompers, a professor at Harvard Business School, and Sophie Wang, a Harvard graduate student.
They wanted to find out whether the problem was not enough women with the education, training or desire to start companies, or whether it was factors like bias or closed-off networks.
They concluded there were plenty of qualified women. Women earn 40 to 50 per cent of degrees in science and engineering, and they represent 30 per cent of the software industry workforce. But they are less likely to have information about how to become an entrepreneur, to see female role models and to know venture capitalists.
Female venture capitalists are more likely to invest in female entrepreneurs, Gompers has found. Yet 91 per cent of venture capitalists are male. Eighty-six per cent are white, and 11 per cent are Asian. Most worked in investment banking, private equity or consulting, and went to Harvard, Stanford or the University of Pennsylvania.
Unsurprisingly, the backgrounds of venture- backed entrepreneurs are pretty much the same. Ninety- one per cent are men, 80 per cent are white and 16 per cent are Asian. Most have degrees from a similar set of colleges and have worked at big tech companies like Google or Microsoft.
“The problem when you have five white men who all went to the same business school and worked in the same firms is their networks overlap, so they don’t draw from a very wide source of entrepreneurial deal flow,” Gompers said.