Alicia Glen, New York’s Deputy Mayor for Economic Development, may have found the city’s special sauce: women entrepreneurs. In unveiling Women Entrepreneurs NYC (WE NYC), a new initiative to increase the number of female entrepreneurs from underserved communities, Glen invoked the case of a would-be mole seller in the Bronx: a woman who has mastered, but not yet marketed, her grandmother’s recipe. “We’re going to teach you how to take that amazing mole recipe and get it into the stream of commerce,” Glen explained. Working with Citi, Goldman Sachs, and microlender Grameen America, WE NYC is precisely the kind of public-private partnership that, done right, has the potential to improve the incomes and lives of low-income women, children and families, create jobs, and drive more broad-based economic growth across the city.
The entrepreneur holds a special place in the American psyche. This is true not only of the nation’s iconic entrepreneurs – Ben Franklin, Andrew Carnegie, Steve Jobs, Bill Gates – but of the millions of unheralded small business owners whose personal livelihoods, and the vibrancy of their communities, depend on the viability of their enterprises. Research now affirms just how important entrepreneurs are to broader employment: in the last 30 years, start-ups and young companies have been the primary engines of net new job creation in the United States.
When it comes to women and entrepreneurship, the story is both worse – and more promising. The gender gap in entrepreneurship is a real and global phenomenon. In the U.S., where women comprise more than half of the educated population, women-owned businesses account for only 16 percent of the nation’s employer firms (at high growth firms, it is only 10 percent). New York’s data bears this out as well. The State of Women Entrepreneurs in NYC, the preliminary findings of New York City’s Department of Small Business Services (SBS), released in coordination with the WE NYC launch last week, showed that although there has been a steady increase in women-owned businesses in New York – where women entrepreneur businesses represent 32 percent of all registered companies – a significant “economic impact” gap remains: men still own 1.5 times as many businesses as women, employ 3.5 times more people per business, and generate 4.5 times more sales per business.
New York City is not the first to highlight these discrepancies. Much attention has been paid of late to the gender gap in STEM and STEM entrepreneurship at the engineer and employee, board and venture capital level, in Silicon Valley and in the corporate world beyond. These distortions – and their economic and financial costs – have spurred a new kind of investment thesis, one centered on unlocking the value of “gender capitalism” in a number of ways: investing in companies that provide critical goods and services to women or in those that are women owned, led, governed or promote workplace equity more broadly. Increasingly, and in response to (often women led) investor demand for social “impact,” large financial institutions are creating products and vehicles that employ the “gender lens:” U.S. Trust offers clients a Women and Girls Equality (WGES) investment approach (which in 2013 outperformed its S&P 1500 benchmark); Morgan Stanley’s Parity Portfolio screens for companies with three or more women on the board; Barclays Women in Leadership Total Return Index and exchange-traded notes (WIL) includes companies with a female CEO or women comprising at least 25 percent of directors. Sallie Krawcheck, one of the most successful women on Wall Street and former Bank of America executive, recently launched the Pax Ellevate Global Women’s Index Fund (PXWEX), which invests in companies that advance women in a number of ways. Last week, Pax Ellevate encouraged the companies in its fund to sign on to the Women’s Empowerment Principles, a joint initiative of the United Nations Global Company and UN Women (the Principles includes guidelines for ways companies can empower women in the work place, marketplace, and community).
WE NYC harnesses this gender lens, but shifts focus from board room to barrio. The logic is similar – investing in women makes good economic sense – but the program is concerned with the poor in New York City, where nearly 25 percent of all women and girls are economically vulnerable, and where 40 percent of the households headed by a single mother (raising more than one million children) live in poverty.
The blueprint comes less from portfolio theory than it does from places like Bangladesh, where microfinance proved that small loans and supports to women to start and run businesses could be a pathway to income stability and long-term economic security. Such is the hope of WE NYC and why Grameen America, started by Nobel Prize winner Muhammad Yunus to bring the microfinance to the U.S., is a founding partner.
This kind of collaboration will be critical to WE NYC’s success. In creating the program, the SBS interviewed women entrepreneurs across the city to better understand the obstacles they faced in setting up and expanding their business. The response: access to capital, business education and support systems, gender discrimination, and the challenges of “going it alone.” Accordingly, WE NYC will focus on these fundamentals. With the help of Citi, SBS will target women for existing entrepreneurship programs. Grameen America will provide free business building services to their community of 27,000 women borrowers, most from the city’s low-income communities. SBS will also work closely with Goldman Sachs 10,000 Small Businesses, a program once run by the Deputy Mayor Glen, which too provides entrepreneurs with technical assistance and access to capital. SBS will also continue to draw on existing partners like Brooklyn based Etsy, the online marketplace for handmade and artisanal goods that has participated in “microbusiness” workforce development programs. Etsy, which in 2014 facilitated nearly $2 billion in sales from microentrepreneurs across the globe and has recently filed for IPO, transcends the gender gap: 88% of its sellers are women.
WE NYC aims to serve 5,000 women entrepreneurs over three years. Partnerships are critical not just for the resources to make this possible. They remind all of us about the shared responsibility – and rewards – of broad-based prosperity. Or what Sally Krawcheck calls “the big idea 2015: inclusive capitalism = a more prosperous capitalism.”
Georgia Levenson Keohane is a Senior Fellow at New America and Director of the Program on Profits and Purpose. This piece was originally published in New America’s digital magazine, The Weekly Wonk. Sign up to get it delivered to your inbox each Thursday here, and follow @New America on Twitter.