By Richelle Johnson, CED Lead Analyst
This content originally appeared in the Alaska Journal of Commerce
49th State Brewing Co.’s theater buzzed with excitement. Not because a casting producer from Shark Tank was visiting Alaska for the first time (she was, and loved it), not because of a giant blow-up shark “airswimming” above the audience (although that was pretty cool), and certainly not because of the generous prize money (there wasn’t any).
But because all five randomly selected competitors for the Vitalize Alaska Pitch Competition were women, and each of them gave a dynamic, compelling performance — some said the best overall showing they’ve seen in Alaska.
This is not the only story of entrepreneurial ladies leading the field in Alaska. For those of us working in Alaska’s entrepreneurship ecosystem it feels like the male dominated world of entrepreneurship is changing, and recently released data corroborates this feeling: Alaska leads the nation in percentage of women-owned employer firms.
Nationally, the number of women owned businesses is expected to increase 1.5 times faster than the average; however, women are still struggling in key areas that can have weighty impacts on business growth and outcomes.
A 2017 report by the U.S. Senate Committee on Small Business and Entrepreneurship, Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive, identified 3 key areas:
Few role models and a lack of mentors that contribute to the perception that entrepreneurship is a male-only endeavor.
A gender pay gap that hurts the ability of women to be successful entrepreneurs.
Unequal access to startup funding and financing streams that leave women with fewer credit options and a small portion of venture capital.
On the mentorship side of the equation, 48 percent of female founders report that a lack of available advisers and mentors limits their professional growth. A lack of mentorship can seriously hamper the creation of new businesses and business growth.
Service Corps of Retired Executives (SCORE), a non-profit mentorship organization, recently found that entrepreneurs with mentors are five times more likely to actually launch businesses than those without.
60Hertz Energy is a computerized maintenance management system for power plant operators and energy professionals. Founder Piper Foster Wilder says that mentors have been invaluable to her strategic and financial decision making process, and that her experience has been largely free of gender bias that would prevent progress.
“I’ve been taken seriously and supported by a lovely circle of men who primarily compose the investor community here,” says Foster Wilder. “On the other hand, those I’ve turned to when most vulnerable or unclear about terms, or unaware of how to proceed have been women.”
Pay gap impacts
According to Tackling the Gender Gap, “researchers have found that college-educated women make about 90 percent as much as men at age 25, but only 55 percent as much at age 45.”
Considering that the Kauffman Foundation says the peak age for a woman to start a business is between 45 to 55, many female entrepreneurs have already experienced decades of wealth discrimination by the time they launch their first business, placing them at a disadvantage in terms of self-funding with savings or pursuing traditional debt financing.
In Alaska, the gap is closing. A 2018 US Bureau of Labor Statistics report says that in 2017 Alaskan women earned about 81.8 percent of what men earn.
According to Fortune, nationally women receive around 2.2 percent of all venture funding, and women of color are awarded an even smaller fraction of that at 0.2 percent. This is a statistic that finds parallels in the realm of traditional funding as well. Women receive just 16 percent of all conventional small business loan, and 4 percent out of the total dollar amount awarded.
Despite the funding imbalance, studies have shown that women-led companies funded through venture capital processes see a 41 percent higher return on equity and 56 percent better operating results. Katherine Jernstrom, a local investor and founder of The Boardroom, says female entrepreneurs and female investors bring different sensibilities to the table.
“In my experience, women tend to have a better ability to listen and learn, and they communicate and ask for help more frequently. This leads to highly coachable entrepreneurs who are open-minded and flexible to feedback and change. Conversely, arrogance and defensive behavior is a quick way to kill a company (and a relationship with your investor)."
And yet, optimism!
The data shows that change is happening, albeit slowly. Although women-led businesses report higher returns on investment and better than average operating results, persistent obstacles appear to limit growth in the number of women-owned businesses. The gaps in the entrepreneurial network indicate major hurdles for women to overcome on their road to success, hurdles which add an additional layer to an already difficult road for entrepreneurs to travel.
So the question that remains is how to change that? Individuals within the entrepreneurial ecosystem (or with resources to contribute to the entrepreneurial ecosystem) can make a significant impact with small changes.
Use the resources out there. Although it’s just one organization among a whole host of local resources, the Alaska Small Business Development Center offers technical assistance and business consulting to clients. Women looking for mentorship or business guidance should reachout.
Think about using your resources. If you have business or industry experience, think about becoming a mentor. If you have funding resources, think about becoming an investor. But also, if you know a female entrepreneur support her where you can. Encourage her, provide support, and add connections to her network.
Cultivate a culture of inclusion in the ecosystem. Dedicated resources designed to encourage female entrepreneurship and support women-owned businesses, including advising and programming, could expand the network for women entrepreneurs. Greater recognition of the barriers to entry for women entrepreneurs through public education could serve to reduce the biases they face.
For more information on the research discussed here check out the University of Alaska’s recently released Women and Entrepreneurship in Alaska brief.