The growth of women owned businesses in New York City is skyrocketing. A new study, “Breaking Through: Harnessing the Economic Potential of Women Entrepreneurs” by The Center for an Urban Future, explores the impact of women-led companies on economies across the country. The comprehensive report, supported by Capital One’s Future Edge initiative, states that the number of women-owned businesses in New York between 2002 and 2012 grew by a colossal 65 percent or 45 new businesses every day. This added more than 56,000 jobs and $3 billion in payroll to the city’s economy. In fact, New York has far more women- owned businesses than other major cities in the United States.
These new businesses span all business sectors, but of particular interest is technology. In tech, the number of women-founded startups has exploded in recent years. A 2014 study by Endeavor Insight found that the number of New York City tech companies with female founders has grown tenfold since 2003.
The Center for an Urban Future report states that “women are starting a greater share of the tech companies in New York than in Silicon Valley and Boston, the nation’s other leading tech hubs.” Although men still launch more tech companies overall than women, women make up a larger share of tech entrepreneurs in New York than in other leading tech hubs. In the third quarter of 2015, a higher percentage of companies receiving venture capital in New York City had a women founder than in Boston or San Francisco.
Why do we see this growth in New York and what are the opportunities and challenges for women entrepreneurs in this city?
According to the interviews conducted for this report, New York offers many advantages to women founders in tech.
First of all, the city provides a welcoming environment. Kathryn Minshew, co-founder of The Muse states, “In my experience, New York has been a much more welcoming and hospitable environment than the Bay Area.” Minshew started her company in New York in the fall of 2011, then moved the company to the Bay Area. After eight months on the West Coast, Minshew moved back to New York in the fall of 2012. “I felt New York had more of a community of women entrepreneurs helping each other, and more industry diversity, including areas where women held position of power, like media and fashion. It’s a more support ecosystem for women entrepreneurs whereas the tech community in the Bay Area feels more homogenous.”
New York offers other advantages as well. The size and scope of its economic base and its global influence in the fashion, media, beauty, and retail industries offer great opportunities for innovation. Women with experience in these industries are now helping companies move into the digital age. Women are also increasing their presence in biotech, health tech, financial tech, as well as the service industry.
Despite the environment for women founders in tech, there are still formidable challenges that affect women entrepreneurs everywhere. These challenges are no different in New York and prevent businesses with great potential from growing and contributing more to the city’s economy.
These challenges are cited in the Center for an Urban Future report.
Women entrepreneurs struggle to raise capital.
Starting a tech company is traditionally less expensive than other startups, yet women founders still attract less money than their male counterparts. The report cites data that “16.9 percent of New York City companies receiving VC funds in the third quarter of 2015 had a female founder, but companies with a female founder accounted for just 8.7 percent of the total VC funds received that quarter—$122 million out of $1.41 billion.”
Another contributing factor that explains why women founders attract less funding is the fact that of the top 20 most active venture capital firms in the city, just 11 percent of the investment teams are women. It has been traditionally much more challenging for women to receive funding from male dominated firms.
Banks are not always inclined to invest in new small business ventures. They are risk averse when it comes to investing in new businesses due to the high rate of failure and because they earn considerably less profit on small loans. In order to qualify for bank loans, small business owners must provide a business plan, credit history, cash flow projections, collateral and often guarantees. For many women, this can be an insurmountable hurdle especially if they are first-time entrepreneurs and have never written a business plan or had to make financial projections. Even with SBA loans, which were created for business owners who may have trouble qualifying for a traditional bank loan, women end up with fewer loans and less money than their male counterparts.