How Can Healthier Entrepreneurial Ecosystems Help Women Succeed?

Think of the entrepreneurial ecosystem in your community. Does your ecosystem support an industry of creativity, manufacturing, or both? Who are the individual entrepreneurs? How many of them are women?

Last week I attended the 8^th Diana International Research Conference, which focuses on research in women’s entrepreneurship. The topic du jour: Women Entrepreneurs in Ecosystems.

Recently, Dane Stangler and Jordan Bell-Masterson of the Kauffman Foundation released a paper on how to measure an entrepreneurial ecosystem. In the paper, they discuss a few important indicators in determining the vibrancy of an ecosystem. The indicators include density, fluidity, connectivity, and diversity.

Below, I discuss specific barriers for women entrepreneurs in the context of the four ecosystem indicators.

Photo of Startup Weekend LA courtesy of Philippe Lewicki via Flickr: https://goo.gl/y9D775

Density

Density is an important measurement of entrepreneurial activity because it helps us understand the number of individuals engaged in entrepreneurship. The suggested measurements for this can include: density of new and young firms, share of employment in new and young firms, and high-tech (or other sector) density.

For women, I’d like to explore the density of new women entering entrepreneurship. The Kauffman Index of Entrepreneurial Activity data shows that, while the percent of men starting new businesses from 2013-2014 has increased by 21 percent, the percent of women starting businesses has stagnated.

Sixty-three percent of new businesses started in 2014 were started by men, while 37 percent were started by women. This representation shows that, nationwide, men are making up nearly twice as much of the entrepreneurial population than women.

According to the Index, the average startup density of a United States’ city is 130.6 new businesses for every 100,000 people. That leaves room for only about 48 new women entrepreneurs out of every 100,000 people for the average city each year. To build policies that welcome more new women entrepreneurs, as well as that foster existing women entrepreneurs, is critical in adding new businesses and new jobs to our cities.

Fluidity

Fluidity, also described in the paper as: indicators based on population flux, labor market reallocation, and number and density of high-growth firms, is an issue especially prevalent among women at an industry-specific level.

Women are dropping out of advanced industries quickly. Advanced industries are those that employ a large amount of STEM workers. The Harvard Business Review suggests that nearly half of women working in these industries will leave over time due to hostile work environments, stating that the main reason is gender bias.

Research shows that in the tech industry women are outnumbered 4 to 1 compared to men. According to the Brookings Institute, 17 percent of U.S. GDP comes from advanced industries, the largest amount of GDP contribution of any industry including health care, real estate, and others. As an area that is historically male-dominated, this leaves a large opportunity gap for women entrepreneurs hoping to break into high-growth, advanced industries.

Connectivity

Connectivity, which the paper measures in terms of program connectivity, spin-off rates, and deal-maker networks, has been raising particular questions in women’s entrepreneurial research.

Yasuyuki Motoyama of the Kauffman Foundation has been studying the entrepreneurial ecosystem connections in a case study taking place in St. Louis, MO. As his colleague, Karren Watkins, of Washington University in St. Louis stated at her presentation at the 2015 Diana International Research conference, there are a number of available resources for new entrepreneurs in St. Louis. Activities such as Startup Weekend, 1 Million Cups, Code Until Dawn, StartLouis, GlobalHack, and many others, provide networking and skill-building opportunities for new entrepreneurs.

However, women are not taking advantage of these networking opportunities because the culture is not often gender inclusive. Something needs to be changed for women to be heard equally at these events. Greater inclusion of women board members and committee members for these organizations and events to help facilitate a greater effort toward equality may be a stepping stone in creating a more welcoming environment for women’s entrepreneurship. 

Diversity

The paper states that diversity of opportunity is essential to a healthy ecosystem. It is in our best economic interest that we support entrepreneurial opportunities for women. Diversity is an obvious barrier to women in entrepreneurial ecosystems. Mainly research has focused on immigrants, economic mobility, and economic or industry specialization.

But, it is also clear that for an entrepreneurial ecosystem to be successful, diversity of women is necessary to develop a vibrant entrepreneurial ecosystem. Ecosystems need a diversity of industries and demographic groups among women entrepreneurs. 

Cultivating a Healthy Ecosystem

Density, fluidity, connectivity, and diversity all need to be addressed in order to build a thriving entrepreneurial ecosystem. Within each of these indicators there remain several factors to consider, including the role women play in helping develop and strength the individual indicators.

Barriers to women in entrepreneurial ecosystems require a systemic cultural shift. These issues are engrained in society; to fix them will require more than funding and simple policy. A shift towards creating a society of inclusion is essential.

If we are able to engage more women in successful entrepreneurship, we will see greater economic growth, stronger entrepreneurial role models, and a healthy and innovative business community. Without successful women entrepreneurs, vibrant ecosystems cannot exist.