When Congress established the Small Business Administration back in 1953, they did so to support the modestly-sized companies that play a crucial role in the American economy. Congress gave the SBA a special imperative to support these small businesses and, in particular, to foster those run by women and other disadvantaged groups. Congress realized that though women-owned businesses had become a major part of the American economy, “women, as a group, are subjected to discrimination in entrepreneurial endeavors due to their gender,” which made it hard to raise and securing capital or capturing market opportunities (Small Business Act of 1953 Section 2.H.C). We’re a woman-owned business here at EDSS, where women make crucial company decisions. Dawn Ely, our co-founder and owner, has guided our company’s development since our founding in 2007, and Sonja Berry, our COO, pilots the day to day operations alongside our CEO David Ely. Women even run three of EDSS’s five departments.
EDSS has been able to grow rapidly under these women entrepreneurs. Nationwide, however, women-owned businesses still struggle to gain access to business funding—especially to venture capital investment. A recent study shows that only 2.7% of the companies receiving venture capital investment have female CEOs, and just over 15% of venture capital funded companies have women on their executive teams. Furthermore, just 6% of the venture capital firms who fund these enterprises have women as partners, a ratio that decreased from 10% in 1999. More often, women turn to their local community networks to fund their business ventures.
Men don’t receive 97% of venture capital funding because they start 97% of the new businesses. Actually, the number of women-owned businesses has grown 150% faster than the national average since 1997. Women own about 30% of the businesses in the US today, and they're pretty successful too. According to a 2014 report, in the last seven years the number of women-owned businesses has grown by 68%, and women-owned companies have seen an 11% increase in employment and a 72% uptick in revenues. In short, when it comes to revenue and employment growth, women-owned businesses have out-performed all but the largest publicly-traded firms.
Michigan is one of the more favorable places for women's enterprises. In fact, it has been one of the top states for women’s businesses in the last seven years, though recently we’ve been overtaken by other states. 30.4% of Michigan’s businesses were owned by women in 2007, which means that we had the 7th highest percentage of women-owned businesses in the US. EDSS is in good company here, and we reflect the national trend of rapid growth in women-owned firms. This year we were named as one of Inc. Magazine’s 5000 fastest-growing businesses as the 47th fastest-growing Michigan-based company and #2,995 overall.
"There is an enormous untapped investment opportunity for venture capitalists smart enough to look at the numbers and fund women entrepreneurs," argues Dr. Candida Brush, co-author of the most comprehensive study of women and venture capital. Accessing the innovation and growth offered by women-owned firms could represent tremendous opportunity for the American economy.
What can be done to encourage the potential economic power represented in women-owned firms? If you are a woman entrepreneur, you have supporting organizations. The Michigan Women’s Foundation runs at least one competition every year to provide women with the seed money, support services, and technical assistance needed to pioneer a new business. To take advantage of supplier diversity policies within the federal government and many larger corporations, you can also get certified as a woman-owned business. We did it; it’s not easy, but it's doable. Find out more here.
Even if you’re not an entrepreneur yourself, you can still make difference. One way to change the perception that only male entrepreneurs can be successful is to showcase the success of women’s businesses, especially those that are growth-oriented and funded by venture capital. We can change purchasing patterns to take into account supplier diversity. We can celebrate the women entrepreneurs in our communities. We can realize that women have a crucial share of classic American ingenuity too.