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Incubators and Accelerators: Providing Support for Women Entrepreneurs

In recent years, the growth of women entrepreneurs has been unprecedented. Women now own 36 percent of all privately-held firms in the U.S., and the rate of ownership has increased nearly 27 percent since 2007. As the number of women-owned businesses surpasses 10 million, the U.S. is witnessing a wave of innovation in support of these entrepreneurs. These firms are vital contributors to the U.S. economy; however, for women entrepreneurs to continue to excel, there remains a need for strong programs that enable women to develop and scale their businesses.  At the same time, as women-owned businesses have been growing in number, incubators and accelerators (I/A) – organizations designed specifically to support early-stage businesses develop and scale – have been vital players in discovery and support of high potential women-owned startups.

Since 2005, with the start of the first accelerator Y Combinator, there has been a growing interest among “startup communities” and other organizations that support business development to enhance the economic viability and competitiveness of new firms. Research conducted by Brookings shows that between 2008 and 2014, these programs increased by an average of 50 percent annually. In 2014, in North America alone, 2968 startups used accelerators and accessed more than $90 million in investments through these programs. In fact, both the private and public sectors are investing in incubators and accelerators. In 2016, the U.S. Small Business Administration (SBA)  invested $3.4 million in prize money to 68 accelerators across the nation.  LAUNCH, a public private partnership between NASA, the USAID, the U.S. Department of State and NIKE, Inc., also that seeks to build and nurture a community of innovators attempting to solve some of the most salient issues of our society through this public-private platform.

The National Women’s Business Council’s (NWBC) new report, Women’s Participation in Business Incubators and Accelerators, sheds light on the interactions between women entrepreneurs and business incubators and accelerators.  These programs have been heralded as exceptionally effective way for businesses to start and scale in a supportive environment; however, the representation of women-owned businesses and partners among the graduates remains low.  To better understand I/A programs and the women-owned businesses they serve, 1,200 women business owners and program managers participated in the NWBC’s original study, examining networks, access to capital, gender-inclusive practices, and general demographics.

Some of the most interesting findings emerge in access to capital. As we know, women face significant limitations in accessing angel and VC funding. Research by Babson found that less than 5 percent of women entrepreneurs access equity financing through VCs. However, of women surveyed by NWBC, 25.2 percent of I/A participants were backed by angel investors compared to 4.7 percent of non-I/A participants. Similarly, 15 percent of I/A graduates received VC funding compared to only 4 percent of non-I/A participants.  In other words, participants who graduated from I/A programs were better capitalized in their first year and more likely to have VC or angel funding than women non-graduates.  

High finance rates from incubator and accelerator graduate survey participants could be a result of the close relationships these institutions have with key finance players. In fact, our research shows that 81 percent of I/As had close relationships with angel and VC investors. But, when we examine women focused I/As, the percentage of program managers with these vital relationships reduces to 59 percent.  This could be a tremendous area of growth for women-focused I/A’s as they attempt to address the capital access gap faced by the women business owners they serve.

Another interesting result of this study relates to employment. As of 2012, only 10.5 percent of women-owned firms are employer firms. These job creators have more than 8.4 million workers and are responsible for 84 percent of all women-owned privately-held receipts – a whopping $1.2 trillion in receipts! I/A graduate participants surveyed were more likely to be employer firms than their non-graduate counterparts, 61 percent and 45 percent respectively. However, too little is still known about the effects of I/As on the development of employer firms. Future research should examine their role in creating employer firms and ultimately stimulating job growth here in the U.S.

There is still so much we need to know about incubators and accelerators, specifically as they relate to access to capital, job creation and growth, and gender. Which leads one naturally to ask questions such as: are these programs meeting the needs of women and men differently? Are men accessing more capital through I/As? Are these programs inclusive?

We simply don’t have enough data to answer these questions right now. What we do know is the presence of incubators and accelerators is bound to increase. As they become a more widely used tool for entrepreneurs, it is essential that women entrepreneurs—and their needs—help to define the future of these programs.

 

Author: Dolores Rowen, Research Manager at the National Women’s Business Council.

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