Women in Business: Investing in Achievement

In California, the Governor and the state legislature have pulled out all the stops to ensure that the State maximizes the funding it’s receiving from the federal Infrastructure Investments and Jobs Act (IIJA). The State’s $180 billion allotment of federal money is directed at firming up the State’s infrastructure, yes, but it’s also adding innovations to ensure its entire corporate population can compete in current and future national and international markets.

While much of the IIJA money is focused on repairing roads and bridges, providing internet service to all Californians, and innovating new energy systems, the State is also focused on raising the profile of women-owned businesses. Legislation enacted on October 8, 2023, now mandates that venture capitalists and private equity funders report on the diversity of their investments in California’s economic sectors, including those that impact women-owned businesses. Senate Bill 54, Investing in Equity (S.B. 54), passed easily in both state chambers (60-15 in the Assembly and 32-8 in the Senate) and, when signed by Governor Newsome, became the first such law in the country to require investors to report the diverse character of the organizations receiving their funding. It goes into effect March 1, 2025.

Exposing Hidden Discrimination

According to the Bill’s sponsor, Senator Nancy Skinner, SD 09, S.B. 54 seeks clarity on a continuing issue in the State – the inability of women- and people of color-owned (POC) businesses to access the funding they need to sustain their enterprise. The challenge to be addressed is not just that male-owned organizations receive over 95% of all V.C. investments but also that the companies receiving those funds are often also managers of large pension funds, such as CalPERS and CalSTRS. A sizeable percentage of the members of those pension funds are women and POC. The Senator believes that many of them would be dismayed that their hard-earned retirement dollars are inaccessible as investment capital to companies owned by their ethnic, racial, and gendered cohorts.

The data backs her up: in 2021 and 2022, while women launched 49% of all U.S. startups, they received only 2.1% of the total venture capital awarded.

Further, not only does this hidden discrimination negatively impact women and POC entrepreneurs, but it also harms the California economy. Studies show that female-driven enterprises deliver higher revenues and outperform male-dominated organizations despite receiving less initial funding. Data also reveals why that is the case:

• Women experience more pushback from investors during initial presentations. In preliminary meetings, women were more likely to have their technical knowledge challenged, whereas men were just assumed to have that knowledge and, when presenting with a woman, were the persons typically asked to share it.
• Women are also less likely to respond to criticism, and instead simply take it as legitimate feedback. Male presenters, on the other hand, will face the commentary directly and are more likely to argue their point.
• Male investors are also often unfamiliar with the goods and services women are touting, many of which were designed to address challenges women face more often than men. Additionally, in these conversations, the investors are typically wealthier than the target market and don’t understand how the innovation can be helpful to them.

The consequence of these realities is that there remains a wide divide between the gender-based economic and social classes involved in the entrepreneurial and investment spheres of influence.

Investing in Women: A National Focus on Females

Investing in women-owned businesses is more than just the pursuit of an equity principle; it’s also an excellent business strategy. Across the country:

• Between 2019 and 2023, the growth rates of women-owned organizations outpaced those of male-owned companies by more than 94% while also adding 282% more jobs than male-owned organizations and generating 82% higher revenues.
• Also during the pandemic era, female business leaders added 1.4 million jobs, and over $550 billion in revenues to the economy.

Analysts assert that this progress was achieved because of women’s resiliency as well as because of “…  the breadth and depth of support they’ve received from government entities, banks, corporations, and philanthropic organizations … .”

Across the country, that deep support has been growing as more entities seek out women leaders who are building a more robust economic foundation within their communities. In its inaugural ‘2024 Impact of Women-Owned Businesses’ report, the American bank Wells Fargo chronicles how females have leveraged the chaos caused by COVID into a new and friendlier enterprise environment. Just some of the data emerging from this demographic:

• More than 14 million women-owned businesses now employ more than 12 million workers.
• Almost 40,000 of those companies employ more than 50 people.
• These organizations generate more than $2.7 trillion annually, which represents almost 6% of the nation’s GDP.

The Invest in Women Entrepreneurs (IWE) initiative, a national organization designed to connect women-owned businesses with the needed capital, dispurses a coalition of advocates, entrepreneurs, and policymakers to ensure that emerging female-led enterprises can find the funds to launch and grow their organizations.

Investing in Women: The California Perspective

The State of California is also invested in this population of female entrepreneurs, and many of its resources provide guidance, connections, and strategies for thousands of its female business owners. According to the 2023 Report on the Status of Women and Girls in California, more than 1.5 million California businesses with paid workers are co- or wholly owned by women, which account for 36% of the State’s privately owned companies.

California’s Women’s Business Centers (WBC) are another iteration of a national push to enhance the power and capacity of women-owned companies. In addition to providing training, mentors, and other resources to new and growing women-owned businesses, these WBCs also focus on resolving the issues that typically plague women in general, most notably child care.

In 2022, the WBCs saw tremendous growth across several metrics, indicating its success at moving women forward to a more equitable economic environment. In comparison to 2021:

• the number of businesses started and sustained grew by 17%;
• the number of women clients served grew by 9% (to 77% overall), and
• there was a 20% increase in the number of businesses launched by women of color.

Further, in just that one year, the companies supported by the WBC were able to:

• leverage more than $43 million in investment capital,
• grossed more than $405 million (an increase of 11% over 2021), and
• create 17,000 jobs, which accounted for a 6% increase year-over-year.

Despite decades of inequities and with the support of both state and federal resources, women are now emerging as the business leaders they are, adding significant benefits to their communities. As further and more investment money becomes available, there’s no reason to think that this progress and this momentum won’t continue, considering the impact these women-owned businesses are having – and will continue to have – on the State’s economy.