Presented by Wells Fargo
By: Lora Powers
Did you know that U.S. women-led businesses:
• Generated $2.7 trillion in revenue in 2023[1]
• Grew their market share of new businesses by 72% between 2019 and 2023 1
• Started nearly half of all new businesses in 2023 1
• Increased average annual revenue 15.5%1
• Grew new businesses 2X faster than men since 2019[2]
Despite this surge, women business owners continue to experience barriers in funding, pay and valuation. Although women could be set to inherit a large portion of the $9 trillion[3] expected to horizontally transfer over the next decade from spouses and partners, closing the wealth gap will also depend on their independent financial success.
Barrier 1: Funding
Estimates show almost a $1.7 trillion financing gap for women-owned small- and medium-sized enterprises globally.[4] According to Harvard Business Review, capital access is a primary obstacle to women entrepreneurs’ profitability.4 Female-founding teams averaged only 2.4% of total Venture Capital funding.4
While this gap seemingly stems from deal-sourcing and pitching, it could also be linked to women’s’ historically held hesitation in seeking financing to avoid debt or being rejected by a lender.[5]
Barrier-buster tip: Seek the funding you need.
Barrier 2: Pay
Women put themselves at a disadvantage when setting pay. According to University of Chicago, there’s a big discrepancy in how women determine their compensation versus men.[6]
It’s common for an entrepreneur to refuse or take a lower salary during a company’s early days, yet data shows 42% of men paid themselves a salary consistent with industry standards, compared with 18% of women.6 Further, on average, female founders paid themselves 28% less than men.6
Barrier-buster tip: Compensate yourself fairly.
Barrier 3: Valuation The valuation process for women-owned businesses should be a priority equal to establishing capital equality among founders. According to a Boston Consulting Group study, women-founded start-ups offer a stronger average ROI than men: 78 cents per dollar vs. 31 cents.[7] However, because initial investment in women-founded start-ups is considerably less than men-founded, the timeline for demonstrating long-term viability is longer.
Barrier-buster tip: Be strategic in determining your valuation timelines.
Closing the gap, empowering women entrepreneurs
While women are founding new enterprises daily, there’s still a long way to go towards ensuring they have equal opportunities for success. Closing the gender wealth gap starts with education and awareness, followed by thoughtful, deliberate action.
As a financial leader, myself for 30 years, I’ve seen considerable growth and resilience, among women-owned and led business owners. More than ever, I encourage you all to double-down: be strategic and recognize that your actions are not only empowering women economically, but that they are making strides to close the wealth gap.
Lora Powers, Head of Middle Market Banking in Illinois
[1] Revenues Of Women-Owned Businesses Grew 15% In 2023 (forbes.com)
[2] 2024 Impact of Women-Owned Businesses Research | WEI (wippeducationinstitute.org)
[3] Spouses, Especially Women, Could Inherit $9 Trillion: UBS – Business Insider
[4] Research: How to Close the Gender Gap in Startup Financing (hbr.org)
[5] Why so many women business owners avoid bank loans | American Banker
[6] Entrepreneurs Need to Start Paying Themselves Correctly. Here’s How – Polsky Center for Entrepreneurship and Innovation (uchicago.edu)
[7] Why Women-Owned Startups Are a Better Bet (bcg.com)
The views expressed present the opinions of the author on prospective trends and related matters in middle market banking trends as of this date, and do not necessarily reflect the views of Wells Fargo & Co., its affiliates and subsidiaries.
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