The economic price paid by women entrepreneurs during the coronavirus pandemic is far higher than that paid by their male counterparts. Because entrepreneurs are increasingly women, post-pandemic economic recovery is threatened. The share of women-owned businesses soared from 4.6% in 1972 to 42% in 2019, according to the American Express 2019 State of Women-Owned Businesses.*
According to the 2019–2020 Global Entrepreneurship Monitor (GEM), the benefits to society of entrepreneurship are better understood and appreciated. Community Revival in the Wake of Disaster Lessons in Local Entrepreneurship, finds that entrepreneurs drive economic recovery and help communities rebound after disasters. Catastrophic events such as a major hurricane, earthquake, flood, recession, or pandemic destroy, but, in their wake, entrepreneurs create. Entrepreneurs—more and more of them women—help communities survive and bounce back from destructive events.
Covid-19 Exposes Existing Inequities For Women
While men are still more likely to engage in Total Entrepreneurial Activity (TEA), the gender gap narrowed between 2018 and 2019 in the United States: the ratio was 7.5 to 10 and 9 to 10 respectively, according to GEM. "TEA includes people who are thinking about starting a business, are in the process of starting a business, or have started a business in the past three years," said Amanda Elam, GEM researcher and Diana Research Fellow, Diana International Research Institute at Babson College.
Women held about 60% of the jobs that have been lost. "I think we should go ahead and call this a'shecession,'" said C. Nicole Mason, president and chief executive of the Institute for Women's Policy Research in a New York Times article. Necessity entrepreneurship was dramatically higher for women than men during the 2007-2008 recession, according to GEM. This trend is even more likely during a shecession. Necessity entrepreneurs cannot find quality employment or are unemployed, so their only viable employment option is to start a business.
Women are more likely to leave their jobs because of childcare issues: 14% of women considered quittingtheir jobs because of the coronavirus pandemic, according to a survey by Syndio, a pay-equity software company. More women may turn toentrepreneurship for flexibility to accommodate childcare issues, according to research commissioned by the National Women’s Business Council. Necessity and flexibility entrepreneurs tend to be sidepreneurs. These part-time businesses are smaller than full-time businesses. Their founders are more likely to return to the workforce when they can.
Opportunity entrepreneurs see possibilities in the market that they want to exploit. They are more likely to enter the market in good economic times than in bad. After the 2007-2008 financial crisis, opportunity entrepreneurship took a back seat to necessity entrepreneurship. This pattern is likely to repeat itself now and be even more extreme.
However, even in bad times, opportunity does exist. Fear of failure is more likely to hold women back from starting a business than men, commented Elam. "This could be because women are concerned that if they fail, they don't have a plan B."
Women of Color Face Greater Challenges Yet Increasingly Are Becoming Entrepreneurs
Women represent 51% of the adult population in the United States, but 42% of all business owners, and only 20% of employer businesses**. Women of color represent 40% of all women, 89% of all net new women-owned businesses, but only 24% of employer women-owned businesses**. Structural differences in personal wealth, business experience, andnetworks, as well as different entrepreneurial motivations and cultural expectations—women do most of the household chores and are more likely to be caregivers—result in an under representation of women, especially among employer**, million-dollar-plus**, and venture-backed businesses.
The Covid-19 Crisis shuttered small businesses unequally. Between February to April 2020, black-owned businesses declined by 41% according to The Impact of Covid-19 on Small Business Owners: Evidence of Early Stage Losses from the April 2020 Current Population Survey. Immigrant-owned businesses dropped by 36%, Hispanic owned businesses by 32%, Asian-owned businesses by 26%, and women-owned businesses by 25%. White-owned businesses fell only 17%. The study didn't analyze minority-women-owned businesses. However, because minority-women-owned businesses are in the sectors that were most impacted by lock-down orders—personal care, retail, and restaurants—and their businesses tend to be smaller than men’s, their numbers may have shrunk even more.
With Covid-19 cases surging throughout the United States, and looming lock downs, even if only partial, will continue to shock the economy in waves. The pandemic will have severe consequences on small businesses, especially those owned by women of color.
Supporting Women Entrepreneurs
There are encouraging signs that federal, state, and local governments, as well as large corporations are helping small businesses recover. They have rallied to support small businesses by providing grants, forgivable loans, and low-cost loans. But more can be done. Entrepreneurial Ecosystem Conditions and Gendered National-Level Entrepreneurial Activity: a 14-year panel study of GEM finds women’s entrepreneurship thrives when there is supportive government policy towards entrepreneurship, minimal commercial and legal infrastructure, and a normative culture that supports entrepreneurship. According to GEM, the United States is weakest at:
- Government entrepreneurial programs: The presence and quality of programs directly assisting small businesses at all levels of government (national, regional, municipal). For example, the federal government should increase funding to SBA Women's Business Center (or local programs), which provide entrepreneurial training, access to capital, access to markets through government and corporate supplier programs, as well as coaching and mentorship.
- R & D transfer: National research and development that leads to new commercial opportunities and is available to small businesses. Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are federal grant programs that provide needed investment in America's most innovative small businesses. Only a tiny percentage of funds from these programs go to female founders. Partnering with organizations such as Springboard Enterprises’ Women's Health Innovation Coalition which I wrote about last week would improve the odds. The female founded companies involved in the initiative are likely to take advantage of SBIR and STTR grants.
- Government policies—Support and Relevance: The extent to which public policies support entrepreneurship. Whether it is local, state, or federal, all levels of government should mandate increased spending with diverse small businesses. The benefits to government agencies include: access to innovative products/services; increase in competition, resulting in better prices and service levels; highlight their commitment to diversity and inclusion, and a shared and durable prosperity; and help them be flexible, agile, and resilient. A Gendered Look at Entrepreneurship Ecosystems finds support for child care would facilitate and encourage more women to participate in entrepreneurship. Despite women entrepreneurs being ready, willing, and able to receive loans, access to them is a challenge. Tracking small business loans by gender, race and ethnicity would hold lenders accountable. Having women as venture capital decision makers, improves the odds for female founders getting funding. While more and more women are starting venture funds, these funds tend to be small. The Small Business Investment Company (SBIC) should rethink it model to encourage and approve the new wave of female founded funds for this program. Emerging manager programs need to be rethought to enable smaller funds to qualify.
- Internal market burdens or entry regulations: The burdens include entry of new and growing firms in the market and the effectiveness of antitrust legislation. For example, big tech firms such as Apple, Amazon, Facebook, and Google, have been accused by smaller rivals of anti-competitive behavior and have asked Congress for protection. Congress should act.
What resources will help your business survive the pandemic?