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As our previous blog posts have mentioned, many women business owners across the board are receiving less funding for their companies than men. The reasons vary and, unfortunately, it hurts women-owned start-up businesses that could otherwise thrive from the additional resources.
Not only does it hurt women-owned businesses, but minority-owned companies as well.
A team of researchers at the Pepperdine University Graziadio School of Business and Management recently released a study, which they found fewer minority-, women- and foreign-owned businesses successfully raise funds from venture capital (VC) and private equity (PE). Moreover, PE and VC make a significant impact on a business’s net sales and employment growth rates.
Although PE positively affects a business, it takes about a year after the company receives funding to see those influential changes. Meanwhile, the impact VC funding has on businesses is immediately recognized and lasts for two years, according to the study.
While conducting the research, the Pepperdine University team was pleased that VC and PE funding made a positive impact on small and mid-sized businesses, but were disappointed to find that a business owner’s ethnicity, gender and nationality affected their chances of getting funded. According to the research done by the team, minority, women and foreign business owners were 22.2 percent, 18.7 percent and 17.9 percent less likely to receive VC financing, respectively.
With more women owning businesses, women and minorities are not scarce, but the Pepperdine University team questions if the low numbers are from discrimination or if there are distinctive challenges they face as business owners. Many investment companies and programs are available to minority- and women-owned businesses to help provide funding, yet the numbers remain low.
More women are owning businesses in the U.S. and the proof is in the numbers.
Women account for 36 percent of business owners in 2012, according to the U.S. Small Business Association. Additionally, according to American Express OPEN, there are 9.1 million women-owned businesses in the United States, with almost 8 million employed workers and more than $1.4 trillion in revenue. Many of the workers are from across the nation and are in minority and economically-depressed communities, according to the study.
As the U.S. population heading toward a “majority minority” by 2024, according to the U.S. Census, funding for minority- and women-owned businesses is crucial to their long-lasting, financial success.