Women Lead the Startup Stats

A new study finds a boom in female entrepreneurship -- and a particularly healthy gains for minority women

By Erin Chambers

Female entrepreneurs may once have lagged behind their male counterparts, but now they're making up for lost time. Business ownership among women in general is growing at nearly twice the rate (17%) as all businesses (9%), according to a new report released this month by the Center for Women's Business Research. And the number of businesses owned by minority women, long the smallest segment of entrepreneurship in the U.S., is growing at six times the rate of all private companies, the study found.

Why the change? "First and foremost, women who want to start a business are seeing others who are doing it, and they think, 'Wow, I can do this too,'" says Sharon Hadary, the center's executive director.

The steady proliferation of capital and institutional resources has also helped make entrepreneurship a more viable option for women, allowing them more control from a professional -- and personal –- standpoint.


  The study, a biennial assessment based on U.S. Census data, finds an estimated 1.4 million privately held businesses in which minority women hold the primary stake, generating $147 billion in annual sales. Since 1997, the number of businesses owned by minority women grew 54.6%. African-American women saw a 32.5% jump, while Hispanics, Asians, and Pacific Islanders, and Native Americans and Alaska Natives each posted increases of 60%. The greatest estimated growth for companies owned by minority women came in the service sector, at 55.8%.

"This is a positive sign for the entire country," Harvard Business School professor Myra Hart, the center's chairwoman, said in a statement. "At this crucial time for the economy, we're seeing that greater participation in entrepreneurship among women from a variety of backgrounds is playing an important role in facilitating economic growth."

The personal impact for women may be driving much of the trend. Hadary says women-owned businesses are growing rapidly because entrepreneurship is a direct path toward economic independence. "You're not waiting for someone to bring you out of poverty, and you're not waiting for someone else to give you a living wage or benefits," Hadary says.


  Mark Rice, dean of Babson College's business school and a CWBR board member, cites the increased awareness of societal support –- including institutions like the Small Business Administration's Small Business Development Centers, local and regional chambers of commerce, and entrepreneurship incubators -- as other factors driving the trend.

According to the National Business Incubation Assn., only about a dozen incubators existed across the country in the early 1980s. Today, that number stands at more than 500. In addition, the SBA recently partnered with the Urban League and the Ewing Marion Kauffman Foundation to form the Urban Entrepreneurship partnership, another new vehicle for reaching out to minority entrepreneurs (see BW Online, 11/16/04, "Help for Minority Entrepreneurs"). "At the macro level, the whole environment for entrepreneurship has gotten more friendly in past decade," says Rice, a former NBIA chairman and a one-time entrepreneur himself.

Whether the increased resources are helping lure more women to entrepreneurship, or whether the growing number of women entrepreneurs is driving demand for such resources remains subject to debate. More women are becoming educated and developing stronger skill sets in the corporate world, adding to a pool of would-be entrepreneurs eager to branch out on their own. "You wouldn't have all these resources unless you had people looking for them," says Julie Garella, managing director of McColl Garella, a Charlotte (N.C.)-based investment bank that focuses on women-owned businesses.


  Despite the encouraging signs, female entrepreneurs continue to struggle with access to capital, particularly credit. This is especially true for minority women. But Hadary says as more and more studies are released that point to the success of women entrepreneurs, the financial barriers -- driven largely by perception -- will begin to fall.

The CWBR study, sponsored by Bank of America, showed the greatest estimated growth was in the services industry, followed by transportation/communications/public utilities and agribusinesses. Based on the number of businesses, employment figures, and sales, California, Texas, Illinois, New York, and Florida were the top five states for privately held companies 51% or more owned by minority women.

And the study's results may have the potential to fuel continued growth on their own. Says Hadary: "You need hard data to get people's attention." Seems these women are already turning heads.

Chambers is a reporter for BusinessWeek Online in New York

Edited by Rod Kurtz