According to a Harvard Business School study, women in leadership positions contribute to a company’s success. While a lot of progress has been made to promote women, the prevalence of women in entrepreneurship, and the funding to back them, is still lagging.
Female-Led Startups Need More Support
Venture Capital funding into startups lands in the billions of dollars range each year; however, only a small fraction of that reaches female (co) founded startups. $36.8 billion was invested in them in 2022, but this is actually less than the $42.6 billion that was invested in 2021!
While the startup industry continues to evolve, there are some areas where support for female founders and leaders is high. These areas are setting an example for others to follow.
Consider Gender-Specific Metrics
- Total venture capital in the past five years invested in women-led startups
- Percent of employer firms led by women
- Percent of employees at women-led firms
- Percent of women self-employed in their own business
- The average income of women self-employed in their own business
Several general indicators were also reviewed, including each state’s startup early survival rate, income tax rates, and unemployment rates.
The 10 Worst States For Female Entrepreneurs
Let’s first look at the states that don’t do well with female entrepreneurs. These are:
Mississippi (50) comes in dead last in this ranking. The Hospitality State is not a very hospitable place to be a woman starting a business. While businesses that do make a go of it find a healthy survival rate (10th), Mississippi is at the bottom of most other metrics. It is 47th for firms led by women, dead last (50th) for employers led by a woman, and 48th for investment into women-led businesses.
The next to last, Alabama (49) and surprising Tennessee (48), struggle to invest in their female entrepreneurs and lacks female business owners overall, respectively.
Nebraska (41), Arkansas (45), and West Virginia (47) have a high number of women-owned businesses each; however, they lack investment capital for new startups.
Oklahoma (46) and North Dakota (44) each have the opposite problem. In the former, businesses have good survival rates, and in the latter, they struggle.
Then you have South Carolina at number 43, where startups do well; however, most do not belong to women.
Finally, coming in at 42 is Michigan, another surprising low ranker. While the state ranks high overall for venture capital investments, there is high unemployment, low income, and few female-led businesses overall.
Top 10 States For Female-Led Startups To Raise Funds
Now for the really juicy information.
Drum-roll, the winner is Colorado! For the third year running, the state of Colorado has helped and supported the most female entrepreneurs. Despite a relatively high unemployment rate this year, Colorado ranks well in all other metrics, with the strongest support coming out of the startup hubs of Boulder and Denver.
The rest of the list includes
- Washington – they have the highest female business survival rate.
- California – this powerhouse state represents 47% of female-startup funding.
- Arizona – 30% of businesses are led by women, and 20% of employees have a female leader. The Grand Canyon State is doing pretty well.
- Texas – outside of California and the Northeast, this Lone Star state is investing heavily in women, spending over $6.5 billion in the last 5 years.
The next five best states are Virginia, Wyoming, Florida, North Carolina, and Illinois, respectively. Surprisingly, New York, Massachusetts, and Vermont did not make the top ten. These states do invest in female entrepreneurs; however, based on these metrics, they did not receive the pandemic-era benefits that the top 10 states did.
What To Do If You’re a Female Entrepreneur
While there are ever-changing trends across the country in different states, where you live doesn’t have to hinder your attempts at getting your business off the ground.
Certified Financial Planner Cady North states it’s better to self-fund your startup if you can.
“I’ve found SBA loan programs to be fraught with high fees from the banks and since they’re really backed by personal assets, it’s no different than self funding in the first place (which I recommend as a starting point for most of my clients)”Cady North, North Financial Advisors
In addition, sometimes it’s not about how much funding you can get but how you spend the money. According to Cady, nonprofits in your state may offer free consulting services and help you gain traction and make the right decisions. Utilize the resources available to you and make the best of them. They may help more than you think!
Starting any kind of business is never easy, and the road to success can be a winding and bumpy one. If you live in these best states for funding, then, hopefully, it works in your favor! Otherwise, consider looking for mentorship and free resources to help guide your next steps.