A jobless boom for female firms

Women are creating new businesses faster than the national average, but they're hiring far fewer workers. One solution: better networks for women.

Phil Marden
Over the past 15 years, the number of women-owned businesses in the US has grown 54 percent; their profits are up 57 percent; but their employee base has grown only 8.8 percent, according to a March report. Boosting that job creation would be a major boon to the economy.

When Genevieve Thiers was a senior at Boston College in the early 2000s, she watched a very pregnant woman trudge up a steep hill to post ads for baby sitters. "This has got to be easier," she recalls thinking, and it sparked her idea to start Sittercity.com, a venue where parents could find and screen caregivers.

Today, Sittercity has more than 70 full-time employees and has helped create jobs by pairing more than 1 million parents with baby sitters. The Chicago-based company stands out because so few women-owned businesses employ large staffs. Women are creating new firms at nearly 1-1/2 times the national average, but they're hiring far fewer workers. The female entrepreneur boom is not creating an employment bang.

"The nation has fewer jobs – and less strength in emerging industries – than it could if women's entrepreneurship were on par with men's," says a report released last fall by the Kauffman Foundation, a Kansas City, Mo., nonprofit. "Women capable of starting growth companies may well be our greatest underutilized economic resource."

The numbers are not encouraging. Over the past 15 years, the number of women-owned businesses in the United States has risen 54 percent; total profits are up 57 percent, according to an American Express report released in March. But employment figures hardly changed at all. In 2012, women-owned businesses employ just 8.8 percent more people than they did in 1997.

The problem: Most firms never create jobs for people other than the founder. Of some 27 million businesses in the US, only 6 million create extra jobs. Women own 29 percent of businesses, but employ only 6 percent of the workforce and contribute less than 4 percent of total revenues.

Business "was such a male-dominated area for so long that there is some validity to women not having the same networks as men," says Alicia Robb, a senior research fellow at the Kauffman Foundation. She points to three areas where women entrepreneurs need to progress: networking, financing, and managing the work-family balance.

Business networks can help entrepreneurs with promotion, marketing, and access to the key for any start-up: money. But women historically have had difficulties accessing growth capital. Part of that challenge may be the lack of women venture capitalists and angel investors, who play key roles in helping fund burgeoning businesses.

"It's a problem," says Ms. Thiers, who took Sittercity through two rounds of venture funding but encountered virtually no women in the process.

In the four years since starting Caskata, a high-end paper and tableware business, Shawn Laughlin has grown sales more than 10-fold, gotten her products featured in leading home magazines, and hired three employees. But access to capital has been "by far the most difficult challenge," she says.

Several groups are trying to help women overcome networking and funding challenges. The Kauffman Foundation expanded its FastTrac program, which offers hands-on training to entrepreneurs, to offer courses for women. Ernst & Young debuted Winning Women in 2008, a national competition that offers support to female businesses with high growth potential. Other support groups include Make Mine a Million $ Business, Women 2.0, and Astia, a nonprofit based in Silicon Valley that focuses on helping women-led companies gain access to growth capital.

Not all women are able to commit the time it takes to start a high-growth, high-employment business. Ms. Laughlin works seven days a week, rising to go to the gym at 6 a.m. and working until midnight. "That's what it takes to start a business," she says. She stepped away from her previous career as a film producer to stay at home with her three children and waited until they were older to start Caskata.

The work-family balance "is a challenge," says Thiers, who recently had twins. "But to me there is a simple answer: intense organizational skills."

One area where women are making strides is science and technology, often stereotyped as men's fields and the foundation for firms that tend to add employees and profits quickly. Last year, the National Science Foundation reported that women earned about 60 percent of bachelor's degrees in the biological sciences. Women have been named the heads of engineering at Harvard, Yale, and Purdue, and lead tech companies Oracle and DuPont.

"Women are making progress," especially in education and established businesses, says Ms. Robb. "That's not transmitting over into entrepreneurship as much as we'd like."

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