In the past 20 years, the number of women-owned firms in the US has increased 114%.
Research shows that many women start businesses because it just seems like a better alternative to the demands of corporate life.
In the traditional workplace, women often face gender discrimination and have a hard time balancing work and childrearing.
Yet while entrepreneurship seems to offer greater autonomy and flexibility, it can also contribute to economic insecurity.
Every day in the US, women start about 849 new businesses.
And over the past 20 years, the number of women-owned firms has increased 114%.
You could herald these developments as signs that the world of American entrepreneurship is, finally, becoming more open to women. But the statistics obscure a more troubling trend.
For many women business owners, starting a company is a way to escape the often-unmeetable demands of corporate life. But more women becoming business owners isn’t necessarily good for the economy — or for the women themselves.
Women often start businesses out of necessity
A 2017 report from the National Women’s Business Council uses the term “necessity entrepreneurship” to explain what’s happening among women business owners.
Typically, that term describes people who start businesses out of economic need — but the NWBC proposes expanding the definition to include non-economic factors as well. Based on interviews with women business owners, the report highlights workplace discrimination and the fact that childrearing and household management typically fall to women.
The American workplace may be especially inhospitable to women. Consider a 2014 PayPal survey of women business owners in the US, China, France, and Mexico: In France and Mexico, 61% and 66% of women said they wanted to be entrepreneurs to have pride in themselves. In the United States, 55% said they wanted better work-life balance.
Having more autonomy is a key motivator
Morra Aarons-Mele has researched the reasons women start their own businesses, and has found that women frequently say they did so to gain more control over their time. In fact, that was part of the reason why she started her own companies: Women Online and The Mission List.
It wasn’t so much the desire to be the next Elon Musk that motivated her — “I just wanted to make a living,” she told me, and “I just never wanted to go to an office again for 10 hours a day.”
Yet in a 2014 Harvard Business Review article, Aarons-Mele writes that “the economic impact of most women’s small businesses may not be what’s best for women, their families or the economy in the long run.” She adds that “women-owned businesses are disproportionately in industries where the median receipts are less than $225,000 (and businesses with receipts less than $100,000 are more likely to fail).”
On the individual level, most women have a hard time replacing the salary they were earning in the corporate world, Aarons-Mele writes.
That’s why Aarons-Mele suspects that many women would in fact prefer to stay in companies — provided they earned more money, had more autonomy, and saw greater leadership opportunities.
Disappointingly, and perhaps surprisingly, gender discrimination may be a problem in the entrepreneurial world as well. As Business Insider France’s Elisabeth Hu reported, enterprises founded or co-founded by women receive about $935,000 in investments on average, while those founded by men receive an average of about $2.1 million.
However, Hu reported, for every dollar of funding, startups founded by women generate 78 cents, compared to 31 cents for startups founded by men.