The idea that women are naturally risk adverse could be a modern one. In the 18th and 19th century, women were the risk takers. Wealthy aristocratic women were often investors and speculators – or gamblers – and the word ‘risk’ was associated with femininity.
If women are not risk-adverse by nature, why are so few of them becoming entrepreneurs? According to the European Commission, women make up 52% of the EU population but only 30% of start-up entrepreneurs are female. OECD data suggests that less than 2% of British working women are business owners, and our Digital Futures Index shows that only 4.7% of women are engaged with total early stage entrepreneurial activity (TEA); half that of men at 9.5%. This disparity could be having serious financial consequences at a time when our economy could do with a lift. What are the barriers that prevent more women starting their own businesses?
Gender bias is often cited as the main reason for the lack of female representation. Society still assumes that women are less comfortable with taking risks than men, greatly reducing a woman’s chance of securing funding for her enterprise; the golden ticket for any start-up. Male entrepreneurs are 86% more likely to get venture capital funding than their female counterparts. The issue is exacerbated by the fact there are are less female venture capitalists than men; some people suggest that men can struggle to understand the potential appeal of female-orientated businesses. Research shows that women are 37% more likely to be self-funded, but whether or not this is a choice is not known.
There could be something of a self-fulfilling prophecy at work here. Potential female entrepreneurs lack identifiable role models or mentors and often find themselves in the minority in education or enterprise, dampening enthusiasm. They may not seek funding assuming it won’t be available. Gender specific events are great sources of encouragement but don’t always ensure female entrepreneurs are mixing with a diverse pool – a strong network is the lifeblood of a start-up.
Lifestyle is a consideration for all entrepreneurs, and the round-the-clock commitment to a new business is a challenge for mothers. That said, childcare is more easily shared between spouses and the very nature of operating a start-up allows for flexibility, making it an easier choice. The bigger barrier for female entrepreneurs is choosing to support their spouse’s business endeavours over their own; this takes away the time and finances that could be invested into their own start-up.
However, it isn’t all about money. Mastercard’s Index of Women Entrepreneurs discovered that the progress of women business owners did not always correlate with the wealth and development of a national economy. Uganda is a low income economy but topped the chart with 34.8% of women business owners, ahead of both the US and Australia. Both Bangladesh and Vietnam beat the UK, with British business women languishing at just over 25%. In these less developed countries, starting a business is often a necessity for survival.
Identifying and understanding some of the barriers faced by female entrepreneurs is just the beginning. By raising awareness of the disparity, society can hopefully take the first steps to reversing it. There is already an out-pouring of varied and far-reaching support, from nurturing career ideas in the classroom to providing women with the support, training, information and networking opportunities to get their business off the ground.
This focus is being fuelled by an increasing awareness of just how valuable female entrepreneurs are to our national and global economy. As the European Commission concludes, “female creativity and entrepreneurial potential are an under-exploited source of economic growth and jobs that should be further developed”. In the UK alone, women-led small and medium-sized businesses already add £70bn to the economy, yet experts believe our economy is missing out on over 1.2m enterprises due to the untapped potential of women.
There is also an appreciation of the unique, powerful skills that women can bring to the table compared to their male equivalents. Research shows that women are more cautious about risks but just as fearless and ambitious as men in these roles. Some claim they are more successful too, as they take considered risks and make more careful choices. Women are more likely to start a business for self-fulfilment than a quest for cash (that’s the men), and list one of their measures of success as making an impact on society.
Couple this more philanthropic leaning with buoyant levels of success and women could be the more inspiring entrepreneurs and serve as the powerful force for financial and social good in business in the years to come. Need we any more reasons to support and empower women to realise their entrepreneurial ambitions and begin to reverse the gender disparity trend once and for all?