Tag: Technology

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McNair Center Women

The Grace Hopper Celebration of Women in Computing

Photo courtesy of Shelby Bice.

McNair Center Intern Shelby Bice attended the Grace Hopper Celebration of Women in Computing Conference along with 18,000 other computer scientists on October 4-6, 2017 in Orlando, Florida. 

The Grace Hopper Celebration honors the legacy of Grace Hopper, a trailblazer in computer programming who led the team that developed the first programming language, a precursor to COBOL. The conference is organized by The Anita Borg Institute for Women and Technology, a nonprofit organization founded in 1987 by computer scientist Anita Borg. It is an event to recruit, retain, and advance women in careers in computing and technological innovation.

The Grace Hopper Conference brings together companies ranging from small startups to tech giants. All are looking to recruit talented computer scientists and engineers. The event also includes panels on topics such as new applications for artificial intelligence and formulating an elevator pitch. In many ways, Grace Hopper resembles any other tech conference. However, there is one crucial distinction: the majority of the panelists, presenters and representatives are women.

What makes the Grace Hopper Celebration so important?

First and foremost, the Grace Hopper Celebration reminds the tech industry that female engineers not only exist, but that they are also just as hardworking and capable as their male counterparts.

When companies like Uber face backlash for low female representation, they often blame a lack of women in the industry. A recent article in the Wall Street Journal reports Uber’s laughable finding that only 1,800 women engineers might be qualified to work for Uber. However, tickets for the celebration sold out within hours due to high interest from female computer scientists across the country. It seems safe to say that there are more than 1,800 women who meet Uber’s standards, regardless of their rigorousness.

The conference exposes women at different career levels to the vast array of careers in computer science. The stereotype of a lone male programmer sitting in a dark room coding video games is not an accurate depiction of computer science. Despite the many areas in which female engineers can apply their skills, many women are often unaware of available opportunities.

Grace Hopper showcases juggernauts like Google and Microsoft alongside smaller, lesser-known startups. The conference embodies the interdisciplinary and dynamic nature of computer science. For instance, Grace Hopper piqued my interest in Flatiron, a company that partners with oncologists to analyze data and recommend better cancer treatments.

McNair Center Intern Shelby Bice at the Grace Hopper Celebration (October 4-6, 2017). Photo courtesy of Shelby Bice.

Most importantly, Grace Hopper celebrates women in computer science. According to the WSJ, the percentage of female computer scientists in industry fell from roughly 37% in the mid-1980s to 18% in 2014. With only minimal gains since 2014, leaders must make a conscious effort to bring more women into the field. It’s also just as important to keep female computer scientists engaged and fulfilled throughout their careers. Many female computer scientists leave technical positions due to a lack of support from their company or, sometimes, gender discrimination. The Grace Hopper Celebration combats these negative forces by fostering an inclusive community.

Going forward

The Grace Hopper Celebration is just one step that the tech industry can take to empower women in computer science. After listening to the inspiring experiences of female computer scientists, entrepreneurs, researchers and leaders, I am confident that events like the Grace Hopper Celebration can help resolve the gender imbalance in computer science.

Grace Hopper will be coming to Houston in 2018. I look forward to attending!

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Accelerators McNair Center

MassChallenge: Connecting Startups and Big Business

MassChallenge was located at One Marina Park Drive until 2014.

Corporations and startups are moving toward early stage interactions. MassChallenge, a highly successful nonprofit accelerator, has been connecting corporations and startups since its 2010  launch in Boston. MC has several US and international locations, which accelerated 372 startups in 2016.

MC delivers positive results and has been listed among the Best Startup Accelerators by the Seed Accelerator Rankings Project, led by Baker Institute Rice faculty scholar Yael Hochberg.  There are over 1,000 MC alumni, who have collectively raised more than $1.8B in outside funding, generated $700M in revenue and created over 60,000 jobs. According to a 2016 MIT study, MC startups are 2.5 times more likely than non-MC startups to hire at least 15 employees and three times more likely to raise $500,000 in funding.

With seven years of history, notable MC alumni includes Ginkgo Bioworks, which designs custom microbes to produce chemicals, ingredients and industrial enzymes. As a startup, Gingko Bioworks raised $154M in funding and signed a deal for 700 million base pairs of designed DNA — the largest such agreement ever made — with Twist Bioscience. Other remarkable graduates of the program include Ksplice, Turo, Sproxil and LiquiGlide.

An Attractive Alternative for Startups

MC is similar to other startup institutions such as Techstars and Y-Combinator. However, the nonprofit differentiates itself by not taking equity. Entrants to the accelerator must be early stage startups, defined as companies with no more than $500K of investment and $1M in annual revenue. As part of the four-month program, selected startups receive mentoring, co-working space, access to a network of corporate partners, tailored workshops and the chance to win a portion of $2M in zero-equity funding. Additional prizes are provided by partners such as The Center for the Advancement of Science in Space (CASIS) and Microsoft’s New England Research and Development Center.

For entrepreneurs in regions with mature ecosystems like Silicon Valley and Boston, MC is one option among an array of accelerators and informal networks. This  density of resources is called  agglomeration, a geographic concentration of interconnected entities increases interactions and the productivity. The MIT study suggests MC acts as a complement to the prior advantages of startups in established ecosystems by providing key resources and access to social capital  and also found evidence that startups founded in regions with higher access to early stage investors had on average higher quality ideas, but that their chances of success were not higher conditional on the quality of their idea.

For startups in nascent ecosystems the resources provided by MC can become the only option to pitch their ideas to investors and advance their company at no cost other than the time invested on the program. Of equal value is the endorsement received as a MC graduate inferring the quality of the startup venture.

A Model Built on Strategic Partnerships

As a nonprofit, MC depends on the support of a network of public, private and philanthropic partners, with the vast majority of their funding coming from corporations. Governments and philanthropic foundations fund MC with the goal to foster regional economic growth. Founders John Harthorne and Akhil Nigam, former consultants at Bain & Company, garnered early support from the Commonwealth of Massachusetts, successful entrepreneurs and large corporations such as Blackstone, Microsoft and the nonprofit Kauffman Foundation.

MC could have faced financial challenges by providing accelerator programs at no cost and with no equity commitment. However, MC was able to become a bridge between large companies’ need for innovation and startups’ need for capital. Large companies have the scale of resources, customer information and market experience, but may lag in innovation. Startups, on the other hand, lack the resources but innovate with sometimes disruptive and successful ventures, frequently taking incumbents by surprise (Airbnb, Uber).

MC serves as a channel between startups and established companies to meet the need for fast-paced innovation. Companies like Bühler and PTC partner with MC to source high-potential startups for the development of advanced technology. Companies can also source tailored programs or tracks for specific needs.

A study done jointly by MC and innovation firm Imaginatik looked at how startups and corporations interact in new collaborative ways. The research team surveyed 112 corporations and 233 startups from various industries. 82 percent of the corporations considered startup interactions important, and 23% stated that these interactions are “mission critical.” Startups have a high interest in working with corporations with 99% stating it is important for them to interact with potential corporate customers, marketing channels and strategic partners.

Expansion

MassChallenge was located at One Marina Park Drive until 2014.

MC communicates its impact and vision to donors by demonstrating the cost-effectiveness of alliances between startups and corporations. A solid accelerator program, global vision, robust network and a sustainable funding strategy have set up MC for success. As stated in the MC Impact Report 2016, the accelerator is committed to running 12 locations annually by 2020, including at least one on each populated continent.

Before establishing an MC accelerator, the metropolitan area is evaluated for the quality of its research universities, urban setting, level of entrepreneurship opportunity and investment capability. As government and private stakeholders partner, a sense of shared ownership becomes crucial to consolidating efforts. This engagement guarantees that the resulting ecosystems are seen as a shared legacy.

The next MC sites are yet to be announced. Currently in five locations with global impact, MC’s 2020 vision is on a path to become a tangible reality.

The author and editor would like to thank Tay Jacobe for assistance with researching and drafting this post.

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McNair Center Startup Ecosystems

Mile-High Entrepreneurship

Boulder has long been considered Colorado’s startup hub, but Denver is emerging as a strong contender. Mentoring and venture capital support have helped Denver’s ecosystem expand rapidly so that it is well on its way to becoming self-sustaining.

Denver has garnered a reputation as one of the best places for high-tech, high-growth ventures.The total number of tech startups located in downtown Denver has increased by 13% in the last two years; 4% above the national average in new startup growth. Denver has collected accolades that ranging from the Best Place for Business and Careers by Forbes to the third Best Place in the Country to Launch a Startup according to Washington D.C.-based accelerator, 1776.

History

Colorado has a history of high-growth entrepreneurship ranging from telecommunications (Dish Cable) to restaurant chains (Chipotle and Quiznos). The state’s venture capital-backed startup activity began in the 1980’s when national venture funds such as Access Ventures, Vista Ventures, Sequel Ventures and Heritage Group invested in local Denver startups. By 2000, Denver was supporting a startup ecosystem, but successful companies left the state or were sold to out-of-state purchasers. VC funding collapsed after the tech bubble burst.

In 2006 Jared Polis, Brad Feld, David Cohen and David Brown established Boulder-based Techstars, which brought the nascent startup ecosystems of Fort Collins, Denver, Boulder and Colorado Springs together. Accepting only 1% of applicants, Techstars is extremely competitive. Graduates of this three-month program average approximately $1.8 million in outside financing. In exchange for 7-10% equity, Techstars provides $18,000 in seed funding, a $100,000 convertible debt and mentorship opportunities. Denver alumni include UsingMiles, FullContact, Revolar and MeetMindful.

Techstars is not the only catalyst for the entrepreneurial community in the region. Former Denver mayor and current Colorado Governor John Hickenlooper, himself an entrepreneur before entering politics, implemented policies that made supporting startups a central focus for economic recovery and growth.

Colorado’s Entrepreneur Friendly Policies

Colorado policymakers has made entrepreneurship a central focus. The state legislature has lowered tax rates and lifted regulatory burdens for the business community. Colorado taxes business at a flat rate of 4.63%, one of the lowest business income tax levels in the country.

Governor Hickenlooper has championed programs such as the Colorado Innovation Network (COIN), which works to connect the 29 Colorado research facilities with entrepreneurs. In 2014, the Colorado Impact Fund was launched, a public-private fund that estimates making 10-15 investments through 2020.

Home-Grown Resources

Since 2010, downtown Denver has added an average of almost 16,000 residents per year, resulting in a population increase of over 13% in the past five years. This remarkable growth has been accompanied with an increase in the number of homegrown startups. As a result, there is a significant number of resources available for Denver entrepreneurs.

Established in 2012, Denver Startup Week draws entrepreneurs from across the country. In 2016, Denver Startup Week attracted 12,500 people from across the country with 300 events, making it the biggest free entrepreneurial event in North America. Entrepreneurs participate in an elevator pitch competition and interact with VC fund representatives.

The Commons on Champa is a high-tech co-working space that brands itself as “Denver’s public campus for entrepreneurship.” Entrepreneurs have access to networking events, panels, workshop and onsite mentors.

The Rockies Venture Club (RVC) helps to bridge the gap between Denver entrepreneurs and investors. RVC is a Denver angel group that provides educational programs. In addition, RVC hosts events where entrepreneurs and investors can meet and make deals.

The University of Denver’s entrepreneurship initiative, Project X-ITE, brings a number of resources to students. Ranked as one of the top 30 entrepreneurial universities in the United States by Forbes, Project X-ITE is a cross-disciplinary initiative focused on the intersection of innovation, technology and entrepreneurship.

The second quarter of 2018 will mark the opening of Catalyst HTI, which will serve a dual role as incubator and accelerator. Catalyst HTI will bring together entrepreneurs in technology and health care to create state-of-the art incubator and accelerator in downtown Denver. Companies such as CirrusMD and Revolar have already committed to joining the community.

Entrepreneurship for Women

In 2013, Denver was named one of the best places for women to start a business as by Nerdwallet. There are several female-focused resources in the city. Denver’s female entrepreneurs have found support from startup accelerator program MergeLane, which specifically invests in female-led companies. Recently, the Commons on Champa also launched Women on the Rise, an initiative aimed to support and celebrate the success of female entrepreneurs.

Other notable resources include The Coterie, Denver’s first women co-working community, and Women Who Startup, which hosts monthly meetings. SheSays, an international trade organization based in the UK, launched in SheSaysDenver in 2014 and counts over 1,000 women as members. SheSaysDenver provides free mentoring and events to women working in technology and business.

Venture Capital

Overall, Denver VC investment is reflective of nationwide trends, with investment decreasing after the Great Recession, and recovering around 2010. Denver firms such as the Foundry Group, Grotech Ventures and Access Ventures are anchoring investment in the ecosystem.
Local VC received a significant increase in 2015 after Welltok raised a massive $45 million round of investment. VC investment has stabilized around $500 million in investments each year since 2014. However, the 2016 Colorado Startup Report notes that the total funding raised in 2016 was distributed across more than 129 different technology companies, indicating a greater distribution of capital. The Downtown Denver Startup Report indicates that in 2015 alone, more than 165 tech startups were founded in Denver in 2015.

Data indicating the number of first round deals in Denver illustrate a stable ecosystem with an average of around 50 first-round deals per year.

Looking to the Future

Denver entrepreneurs have noted that there is a significantly lower amount of early stage fundraising in the ecosystem. However, this is a reflection of a nationwide trend of cautious investing in early-stage investment.

Denver does have early stage VC investors, but in many cases, does rely on angel investors to supply funding. The University of Colorado’s Silicon Flatiron recommends the continued support of Colorado and Denver super-angel funds, also known as Micro-VCs, which are about $2-$10 million in size and specialize in early stage investing.

In the coming years, it is likely that Denver’s ecosystem will reach critical mass and consolidate as an attractive option for local and out-of-state entrepreneurs. With a strong and growing infrastructure for entrepreneurship, Denver’s startup growth and success is likely to continue.

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McNair Center Startup Ecosystems

Gateway to Entrepreneurship: St. Louis

You probably know St. Louis as the Gateway to the West, but the city is emerging as a strong entrepreneurial ecosystem. For decades, St. Louis followed the economic development model of attracting and keeping large out-of-town companies with generous tax breaks and subsidies. In the 1990’s, political and business leaders became frustrated with the slow economic growth under these policies and began implementing entrepreneur-friendly policies.

While the city has not abandoned tax breaks and other subsidies to attract big companies, it has adopted an entrepreneurship model driven by state and private efforts. This model appears to be working. Data from the Census Bureau show 9.7 percent of businesses in St. Louis are startups less than three years old. St. Louis can now boast the second best rate of startup growth in the country.

Venture Capital

St.LouisFirstRounds
Author’s calculations based on data from SDC Platinum VentureXpert

It is widely believed that an ecosystem should be producing 30 to 35 deals per year to beconsidered stable. St. Louis saw three consecutive years of 30 or more first-round deals from 2013 to 2015. While 2016 reflects a poor year for St. Louis VC investment and first rounds, this decline reflects a nationwide trend.

StLouisVC
Author’s calculations based on data from SDC Platinum VentureXpert

 

 

St. Louis boasts sizable venture capital investment. Like many ecosystems, St. Louis suffered from the dot-com bust in the early 2000’s, but a strong pattern of VC investment seems to be emerging. How has St. Louis achieved venture capital growth?

History

The first entrepreneurship-focused programs established in St. Louis were the Donald Danforth Plant Science Center and Skandalaris Entrepreneurship Program.

The Donald Danforth Plant Science Center provides support for plant scientists who work directly with the agriculture technology startups. The Danforth Plant Science Center cofounded the Ag Innovation Showcase, the premier agricultural technology and innovation showcase in the nation.

The Skandalaris Entrepreneurship Program began in 2001 at Washington University, but expanded in 2003 to the Skandalaris Center for Interdisciplinary Innovation and Entrepreneurship. The Skandalaris Center provides entrepreneurial training, networking opportunities and a mentoring program.

When the Great Recession hit in 2008, St. Louis suffered. The “corporate jewel” Anheuser-Busch laid off hundreds at their St. Louis headquarters. St. Louis’ per capita personal income shrunk by 5 percent. The metro unemployment rate reached over 10 percent. Despite Danforth Plant Science Center and Skandalaris Entrepreneurship Program, there still was not much positive entrepreneurial output. Researchers and politicians blamed the national economy and the greater time required to establish agriculture-focused startups.

The St. Louis entrepreneurial ecosystem remained largely unsupported until 2012 when the nonprofit Information Technology Entrepreneurs Network (ITEN) began to catalyze the ecosystem. Jim Brasunas, a former telecommunications manager turned entrepreneur, founded ITEN by utilizing the public-private investment fund, Missouri Technology Corporation (MTC).

While ITEN was founded in 2008, many of the programs were not active until two or three years after its founding. Many entrepreneurs credit the development of the entrepreneurial ecosystem to Brasunas and ITEN.

Resources

St. Louis has the requisite components of a successful entrepreneurial ecosystem; highly ranked universities, research-focused centers, accelerators, incubators and venture capital funds. However, the strong private-public partnerships and women-focused accelerators make SSt_Louis_nightt. Louis’ ecosystem unique.

In 2012, MTC put a significant amount of seed money into a new economic development model, Arch Grants. Arch Grants runs a global competition to identify potential entrepreneurs from almost any industry sector. Arch Grants then provides entrepreneurs with $50,000 equity-free grants and pro bono support services if they agree to build their businesses in St. Louis. Over 100 startups have been awarded Arch Grants including RoverTown, which was named the fastest growing tech startup in St. Louis.

Accelerators

Accelerators are key components of any healthy entrepreneurial ecosystem, and St. Louis has a plethora of accelerators. Capital Innovators is a 12 week accelerator program that provides $50,000 in seed funding to startups. The accelerator focuses on IT and consumer product startups, such as LockerDome, Bonfyre and Fluent.

Another notable accelerator is BioSTL. The investment arm of BioSTL, BioGenerator, has worked to grow bioscience startups in the region since 2001. MediBeacon, BacterioScan and Galera Therapeutics are among the startups that have gone through BioGenerator.

SixThirty is St. Louis’ largest and most famous accelerator with corporate partners like State Farm and the St. Louis Regional Chamber. The accelerator provides up to $100,000 in funding and sponsors two cohorts per year. SixThirty’s expertise is venture capital and revenue acceleration for startups that are at the late-seed stage.

St. Louis’ agricultural-technology industry is back, and Yield Lab, opened in 2014, focuses on accelerating this industry. Its nine month AgTech program provides early-stage companies with $100,000 in funding and looks to add value to companies that from a nonfinancial standpoint. The Yield Lab opened a second accelerator in St. Louis’ sister city, Galway, Ireland in January of 2017. Graduates of the Yield Lab include S4, Arvengenix and Holganix.

In 2012, St. Louis ranked a disappointing 25th in a national survey of women’s entrepreneurship. Prosper Women Entrepreneurs (PWE) was born when community leaders realized that the region could significantly improve its economy and entrepreneurial ecosystem if women reached their entrepreneurial potential.

Women now own a higher share of startups in Missouri than in any other state. PWE offers support to a woman-owned company focusing on technology, health care IT and consumer startups. Graduates of PWE include Appticles, Bandura System and SixPlus.

Co-Working Spaces

In addition to accelerators, St. Louis has a significant number of co-working spaces such as Exit 11 Workspace and Hive44.

Founded in 1999, CIC St. Louis is the most famous of the St. Louis co-working space. CIC focuses on biotechnology and bioscience startups. $2.1 billion in VC has been raised by companies originally based at CIC and more than 800 companies call CIC home.

Venture Capitalists

St. Louis has a significant number of venture capitalist firms. While venture capitalist firms invest around the country and world, it is important to have firms in ecosystems as they often provide VC stability. Advantage Capital Partners, BioGenerator and RiverVest Ventures appear to serve as long term midsize anchor funds for St. Louis. Cultivation Capital raised its first fund in 2012. Lewis and Clark Ventures emerged in 2014 and are a midsize fund.

Looking to the Future

St. Louis is emerging as a stable and strong startup ecosystem in the Midwest. Efforts to increase private and public support for resources, as well as funding and tax credits for research, will facilitate St. Louis’ continued growth.

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McNair Center Weekly Roundup

Weekly Entrepreneurship Roundup 4/14

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about entrepreneurship this week:

How to Make Texas More Startup-Friendly

Iris Huang, Research Assistant, McNair Center for Entrepreneurship and Innovation

McNair Center’s Huang interviews Blake Commagere, entrepreneur, angel investor and startup mentor in the San Francisco Bay Area on how to improve an entrepreneurial ecosystem. Commagere graduated from Rice University in 2003 with a degree in Computer Science. Upon graduation, Commagere moved to Austin to begin his career as an entrepreneur and soon decided to move to Silicon Valley. Commagere has raised over $12 million in VC, started seven companies and sold five.

Commagere describes the pull of talent toward San Francisco as “a virtuous cycle,” where “former successful startup founders become the next generation angel investors and venture capitalists, who fund and help more startups succeed.” Silicon Valley’s concentrated network of VC firms and tech startups provide struggling entrepreneurs with a vast pool of mentorship opportunities, funding resources and talent. Budding startups heavily rely on local tech networks for early-stage support and advice. In order to develop its entrepreneurial ecosystem, Texas cities need to focus on building its tech space.

Additionally, the state’s cities must expand their VC presence. Otherwise, there will always be too many startups fighting for too little capital (as if this isn’t a problem already), and startups will continue to move to cities like San Francisco. Startups depend on local VC firms because many firms refrain from investing in companies outside their primary city. When firms do invest in outside companies, the qualification bar is set much higher.

Medical Device Startups and the FDA

Iris Huang, Research Assistant, McNair Center for Entrepreneurship and Innovation

McNair Center’s Huang takes a look at the FDA approval process for medical devices. The medical device industry is a $140 billion market. For many companies in the industry, obtaining FDA approval is a long and costly path. For some, it’s a barrier. Of the 6,500 companies in medtech, 80 percent are composed of fewer than 50 employees.

A Stanford University survey of over 200 medtech companies found that the average cost for a low-to-moderate-risk 510(k) product to obtain FDA clearance was $31 million. The same survey found that it took these products 31 months from initial communications with the FDA to obtain clearance. For startups, these costs pose significant barriers to entry. Huang aptly summarizes this dilemma: “as the cost of getting to market approaches the average exit value, the medtech funding equation looks less attractive to venture capitalists.”

The FDA approval process acts as an essential screening point in the medtech industry. However, Huang recommends that policymakers consider possible ways to alleviate the significant burdens placed on the businesses involved in the development of these critical technologies.

First Data Joins Silicon Valley Bank In Fintech Accelerator

Tom Groenfeldt, Contributor, Forbes
Silicon Valley Bank (SVB) recently announced a collaboration with First Data, a global payments technology solutions company, on Commerce.Innovated, its fintech accelerator. Commerce.Innovated, founded in 2014, is a four-month long virtual accelerator for startups in the financial services and technologies sector. The accelerator, unlike most early stage accelerators, focuses on startups that have already secured or are in the process of securing seed or Series A funding.

According to SVB’s Reetika Grewal, the accelerator looks for firms with “five to 10 people with an idea they are committed to.” In this stage, startups usually require help with the “operational,” rather than conceptual, front of development. Commerce.Innovated helps fintech firms bring their solutions to market. Since these startups already possess strong leadership with a clear vision for their product, a virtual platform makes sense.

A $150 Million Fund, The Engine, Will Back Startups Others Find ‘Too Hard’

Lora Kolodny, Contributor, TechCrunch

The Engine is a venture fund and accelerator for “advanced technology startups.” The new fund recently closed its debut round at $150 million. Startups in The Engine’s portfolio gain access to one of MIT’s unique resources, The Engine Room, a laboratory for small startups to develop and test their technologies. In addition to to The Engine Room, startups also receive access to laboratory equipment and technologies from organizations in the greater Boston area.

Despite its close affiliation to MIT, The Engine invests “in teams and technologies that hail from a variety of industry and academic backgrounds, not just from the MIT ecosystem.” The Engine supports companies involved in the development of “hard-tech” – so basically anything “from advanced materials and manufacturing technologies to medical devices, robotics, artificial intelligence, nuclear energy, fusion and more.”

Hard-tech startups typically face higher costs, more risk and a longer development period than most B2B or consumer-focused software. These startups often find it difficult to find VCs willing to invest in their innovative, but risky technologies. The Engine, according to the fund’s CEO Katie Rae, is dedicated to lowering the costs of development and testing “hard-tech” and encouraging more entrepreneurs to go into the field.

Tax Reform Must Help Small Businesses, Too

Laurie Sprouse, Reporter, The Wall Street Journal

Laurie Sprouse, a small business owner from Dallas, covers tax reform and small businesses for The Wall Street Journal. As Sprouse points out, small businesses have added two thirds of new jobs to the U.S. economy in recent years. Still, analysts and policymakers continually propose tax overhauls that largely ignore the plight of small firms. Instead, politicians and reporters alike focus on alleviating financial burdens for larger corporations and providing helpful, but insufficient, tax credits for small businesses. According to Sprouse, “Only a plan that benefits businesses of all sizes equally will create the broad economic growth President Trump and Congress seek.”

Stripe Acquires Indie Hackers in Bid to Strengthen Relationship with Entrepreneurs

Ken Yeung, Contributor, VentureBeat

Founded in 2010, tech company Stripe delivers application programming interfaces (APIs) that support electronic payments for consumers and businesses. Recently, the firm announced plans to acquire Indie Hackers, a startup dedicated to creating an internet community for entrepreneurs to share their success stories and lessons. While the financial terms of the deal remain unclear, it seems that site will operate as an independent subsidiary of Stripe.

Indie Hackers founder, Courtland Allen, describes his site as a “community where successful founders could share their valuable stories and insights, and where aspiring entrepreneurs could go for inspiration and advice.” Meanwhile Stripe executives view the deal as an opportunity to grow “the GDP of the internet” by increasing the “overall number” of successful businesses.

In an interview with VentureBeat, a Stripe spokesperson revealed that the company wants to support Indie Hackers’ mission by taking on some of the budding site’s financial burden. In just under a year, the site already runs a monthly profit of $6,000. Going forward, Allen hopes to see Indie Hackers take on a similar role as Y Combinator’s Hacker News.

The Weekly Roundup will return in June. 

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McNair Center Rice Entrepreneurs Startup Ecosystems

How to Make Texas More Startup-friendly

profileOver the last decade, Blake Commager (@commagere) has raised over $12 million in venture capital funding, started seven companies and sold five—including the first version of Facebook Causes and some of the most popular apps on Facebook, such as Zombies and Vampires. Born and raised in Midland, Texas, Commager graduated from Rice in 1999 and moved to the San Francisco Bay Area in 2003.

Commagere is the CEO of MediaSpike and an angel investor, advising several startups in the Bay Area. His varied experience in the tech startup space, from founder to investor and mentor, gives him a comprehensive perspective on the Silicon Valley startup ecosystem. As Commagere worked at a startup and tried to start a company in Austin before moving out to Silicon Valley, I was interested in learning why he chose to move out to the Bay Area and what Texas could do to better support startups.

Iris Huang: What brought you to the Silicon Valley?

Blake Commagere: I had always been interested in solving the problem of address book updating. In 2003, a friend of mine and I were working on our own company in Austin, and while doing competitive analysis, we found out Plaxo, a startup in Mountain View, California, was trying to solve the same problem. I liked their solution and they already had funding so I moved here to join the company.

I also felt the pressure to move to the Bay Area. By virtue of having a high concentration of tech talent, the Bay Area created a gravitational pull for even more tech talent. You see that with a lot of industries—they blow up largely in a few cities and as the ecosystem develops around them, the momentum increases, which makes it harder for other cities to compete. The more talent it has, the more successful the industry becomes in the region, the more new talent comes. The concentration of talent creates a virtuous cycle—in the Bay Area, the former successful startup founders become the next generation angel investors and venture capitalists, who fund and help more startups succeed.

The concentration of talent in the Bay Area has two main advantages:

The sheer concentration of talent and ecosystem make the process of building a startup easier, not a lot easier, but even if it’s just 2 percent easier, that makes all the difference. Given how hard it is to build a company, anything that makes it a little easier can be incredibly important. The high concentration of talent in the Bay Area makes it easier for startups to hire good employees. Startups will also have an easier time meeting people who can provide advice and introduce them to investors.

The large tech community in the Bay Area also provides a lot of emotional support, which turns out to be extremely important for startup founders. What’s unique about entrepreneurship is the combination of the high level of stress and lack of experience and resources. It’s very intimidating as an entrepreneur when you have a dozen things you have to do today but you have no idea how to do any of them. No business school teaches you what you need at a startup day to day. Sometimes other founders can’t help you either, but at least, you can commiserate with them. For example, after you pitch to a dozen VCs and no one wants to invest, you can talk to your community—they’ve all been through the pain so they understand how you feel. The therapeutic value of the commiseration is really important. You won’t feel so lonely, which, in addition to the hardship of building a company, could be overwhelming.

IH: How can Texas cities become more friendly to founders?

BC: A good ecosystem for startups cannot be developed overnight. It takes several entrepreneur/venture capital cycles—maybe over 20 years.

Someone should have a laser focus on building the tech community so entrepreneurs no longer feel alone in their journey. What entrepreneurs are trying to do is just too overwhelming to do on their own. They will leave for somewhere that has a supportive community if they can’t find the mentorship and network locally. In Austin, most of the time meetings happen by chance. Serendipity is unreliable—someone needs to build a tight knit community and make sure the support network is well-organized.

Someone has to bring capital there. No matter how great the idea is, you need to have money to fund it and make it happen. The number of VC firms and the amount of VC funding in Texas are limited (Note: total VC funding in Austin is $834 million, as compared to $25 billion in Silicon Valley according to the MoneyTree Report from PricewaterhouseCoopers). In Silicon Valley, there are so many funds; a startup can be rejected by a dozen of the top VC firms and still be able to raise funds from hundreds of other VCs. However, in Austin, if you pitch to Austin Ventures and they say no, your fundraising is over.

Also, with a small number of VCs, their time is limited so they can only invest in a small number of companies. Imagine if there are 100 great startups that deserve to be funded but there are only six general partners in your region. Simply for lack of VCs, some of these companies won’t get what they need to survive.

IH: Why is it necessary to raise VC funds locally?

BC: Silicon Valley VCs are unlikely to invest in startups in Texas. VCs have strong motivation to invest in nearby companies because the nature of venture capital investing—95 percent of startups fail—forces them to use their time wisely. VCs usually take board seats at the startups they invest in. Every board seat they take is an opportunity cost, preventing them from taking others. When VCs invest in startups in other cities, they have to travel for board meetings. So the time they spend on that board seat is longer and the opportunity cost for that investment is higher. That’s why you can’t expect Bay Area VCs to invest in Texas startups and when they do, the bar might be three times higher for Texas startups than Bay Area startups.

Funding is not the only value VCs provide for startups; their professional network plays an important role in helping startups succeed as well. However, VCs’ network is geographically dependent. If the startups are far away, they will not be able to benefit from VCs’ powerful network. This lowers their chance of success. This also discourages VCs from investing outside their primary cities.

Raising a fund to start a VC firm in Austin or Houston could be challenging—the new VCs will have to take the extra step to convince potential limited partners that “there is a reason and opportunity to invest here,” instead simply joining all the other VCs are in the Bay Area. However, this is what has to happen. Ideally, the new VCs have built their career and network in Texas for many years, which gives them the motivation and ability to raise a fund locally.

IH: How can Texas cities retain local talent?

BC: It all comes back to the availability of VC funding. Frequently I see announcements that a city is hoping to make the city more attractive to startups with programs for office space or professional services. None of that is a big expense compared to your employee costs. Some people argue that since everything is more expensive in the Bay Area, it makes sense to stay in Austin or Houston. For example, with $1 million funding, you might be able to hire 10 employees in Houston, but in the Bay Area, you can only hire 5 employees with similar credentials. However, this is an unrealistic comparison. In Houston, you are more likely to get $0 funding so really you can’t hire anyone while in the Bay Area, you might be able to get $1 million and hire 5 employees.

Each entrepreneur has their own timeline—when they need to raise funding, if there’s no funding available in Austin or Houston, they either have to shut down their startups or move to the Bay Area and raise money here. Right now everyone just follows the gravity and moves to the Bay Area because that’s the easiest. Texas is losing the tech talents and startups that create so many jobs to the Bay Area. It is very important to break the cycle. Step one is to stop the talent drain with VC funding and keep startups here. As the ecosystem matures, the long-term goal is to make it as easy to raise funding in major Texas cities as in the Bay Area.

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Government and Policy McNair Center

Medical Device Startups and the FDA

Does the FDA approval process impede innovation? Medical devices must be reviewed for safety and effectiveness by the Food and Drug Administration before being marketed in United States, which encompasses 43 percent of the global market for medical devices. Startups in the medical device industry are often dissatisfied with this approval process, favoring the FDA’s European Union peer, CE Marking. Some founders even believe the time consuming and expensive FDA process “holds back the entire industry.”

Classification of Medical Devices

The FDA classifies medical devices based on their associated risks. Class I devices, like enema kits and elastic bandages, have minimal potential for harm and are typically exempt from the regulatory process. Devices that present medium risk, like contact lenses, are classified as Class II and carefully reviewed. Class III devices, such as pacemakers and replacement heart valves, are the highest risk devices, subject to the most regulatory controls.

Blood Pressure Cuff -- Class II

The FDA categorizes devices based on their function, not their underlying technologies. These categorizations may cause unnecessary delays by imposing regulatory requirements on technologies that have already been tested. Ariel Dora Stern of Harvard Business School found that for devices based on the same technologies, those placed in already existing product categories took less time to approve than those placed in new categories.

Premarket Processes

There are two FDA processes required of medical devices in different classifications:  Premarket Notification 510(k) and Premarket Approval (PMA).

Most Class I and Class II devices can be marketed after receiving 510(k) clearance. It demonstrates that the device is “substantially equivalent” to a device already on the market. Those devices that can be paired with substantial equivalents or “predicate devices” do not require a PMA. The 510(k) clearance tends to take around 200 days and costs much less than PMA.

PMA is required for new Class III high-risk devices. Companies need to submit evidence that provides reasonable assurance that the device is safe and effective. The PMA can take more than 450 days and include the ongoing costs of clinical trials among other expenses.

The clinical study stage often takes as long as the initial concept development stage. Josh Makower, Aabed Meer and Lyn Denend at  Stanford University surveyed over 200 medical device companies and found that it took the companies an average of 31 months from first communication with the FDA to receive 510(k) clearance and 54 months for PMA. 81 percent of survey respondents believed that the FDA has a difficult time with novel technologies. Stern also found that the first device in any given category took 34 percent longer to receive approval than the next device in that category, leading to an average delay of 7.2 months.

Hefty Expenditures

Makower et al. found the average total cost to bring a low- to moderate-risk 510(k) product from concept to clearance was $31 million, with $24 million spent on FDA-related activities. For a higher-risk PMA product, the cost became $94 million, with $75 million spent on FDA requirements. Approximately 50 percent of medical device exits (acquisitions or IPOs) are under $100 million; 75 percent are under $150 million. As the cost of getting to market approaches the average exit value, the funding equation looks less attractive to venture capitalists.

Obstacles to True Innovation

It is likely that companies sometimes compromise and pursue the less risky yet also less innovative 510(k) route. They make relatively simple extensions to low-risk product lines already in existence. The FDA typically evaluates more than 4,000 510(k) notifications and about 40 original PMA applications each year. This means that only one percent of devices are innovative, new medical technologies that require clinical data to get FDA approval.

Challenges Facing Small Companies

Startups face particular challenges in navigating the FDA regulatory process. More than 80 percent of the 6,500 medical device companies in the U.S. have fewer than 50 employees. According to the industry-wide survey, 72 percent of small companies submit new products. Only 35 percent of large companies do this. The total average review time for small companies is 330 days, as opposed to 177 days for large companies. However, Stern found that privately-held firms with revenues under $500 million made up only 14 percent of FDA submissions for follow-on devices and 7 percent for novel devices.

CE Mark or FDA?

The EU represents 31 percent of the global medical device market, which has a projected value reaching $544 billion by 2020. Access to both the American and European markets gives startups 74 percent of the global market, worth $400 billion. Attempting both FDA approval and CE Mark approval simultaneously is not feasible for most companies

In 2012, a Boston Consulting Group study found that most PMA medical devices were available in Europe 3 years earlier than in the U.S. Makower et al. found it took medical technology firms an average of seven months to get CE Mark clearance and 11 months to get PMA for the EU. Approximately two-thirds of small medical device companies obtained clearance in Europe first. The number one reason is the unpredictability of 510(k) requirements, according to a comprehensive industry-wide survey conducted by John H. Linehan and Jan B. Pietzsch at Northwestern University.

The difficulty of obtaining FDA approval also makes it harder for startups to raise VC funding. In 2012, BCG interviewed venture capitalists on medical device investments and found that some investors would not invest in a medical device startup unless the company received a CE Mark and promised consequent revenues in Europe.

Conclusion

The value and importance of FDA approval are undeniable. However, policymakers should examine whether the lengthy and expensive FDA approval process is necessary. The FDA might consider reducing the length of the process for all applicants. It might also help if the FDA accommodates startups’ specific needs. This can be done by granting subsidies to small businesses, offering expedited paths to truly novel and needed technologies and providing equipment or space for conducting clinical trials to innovative startups.

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McNair Center Weekly Roundup

Weekly Roundup on Entrepreneurship 3/31

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about entrepreneurship this week:

Business Groups Hope Trump Can Change Health Law by Administrative Action

Jeffrey Sparshott, Reporter, The Wall Street Journal

Juanita Duggan, CEO of the National Federation of Independent Businesses, described the unraveling of the American Health Reform Act as “a dismal failure.”

Despite several nationwide organizations like the National Retail Federation, the U.S. Chamber of Commerce and the National Association of Manufacturers pushing lawmakers to support the plan, Republicans could not build a consensus for the bill.

Not all small business owners favored the GOP bill. According to Tom Embley, CEO of Precision AirConvey Corp., a Newark manufacturing company that employs 40 workers, the proposed plan wouldn’t have done “anything to lower costs” for his firm.

More Than Obamacare Repeal, Small Businesses Want Congress to Rein in Costs

Stacy Cowley, Reporter, The New York Times

The New York Times’ Cowley reports on health care reform as told from the perspective of small businesses. While small businesses have been some of the most outspoken critics of the ACA since its passage in in 2010, the group as a whole is actually fairly divided on the issue; according to Manta and BizBuySell, approximately 60 percent of small business owners want the ACA to be repealed.

As Cowley points out, “every business is uniquely affected by the complex law.” She spoke to small business owners across the country, representing a variety of regions and industries. Two themes were common: The lack of sustainability of the status quo and the need for bipartisan reform. One thing Congress’s recent health care drama did accomplish was to reveal small businesses’ growing disdain for Congress’s inability to find common ground and deliver policy stability.

Early-Stage Investment for Software Startups Holds Steady

Alex Wilhelm, Editor In Chief, Crunchbase News

A recent Crunchbase report reviews the performance of younger SaaS companies after a year of relatively illiquid market for late-stage SaaS startups in 2016.

SaaS, or software as a service, refers to “firms that sell software products on a recurring basis.” As Wilhelm notes, SaaS firms constitute an “important part of the modern startup landscape.” According to Crunchbase analysis, early and mid-stage SaaS startups experienced relatively tame Series A and B funding rounds last year, despite the sector as a whole putting on a poor showing for enterprise IPOs when compared to 2015.

Wilhelm suggests that the better-than-expected fundraising aggregates indicate investor confidence that “the late-stage and public markets would figure out SaaS, or a blind willingness to follow a plan that was supposed to work.”

Kushner to Oversee Office of American Innovation at White House

Michael C. Bender, Reporter, The Wall Street Journal

President Trump recently announced the opening of a new White House office, the Office of American Innovation (OAI). The new White House office, tasked with mimicking “private-sector efficiency inside the federal government,” will be led by Jared Kusher, senior policy advisor and son-in-law to President Trump. The office will oversee a number of ambitious task forces, including the taskforce that will be headed by Governor Chris Christie to address the opioid epidemic.

According to Press Secretary, the OAI will address both long-term and urgent needs, such as” modernizing information technology” and “streamlining the Department of Veteran Affairs.” Additionally, the office will conduct communications with many executives, including prominent Silicon Valley CEOs who visited the White House in recent months.

 

Ask a Female Engineer: How Can Managers Help Retain Technical Women on Their Team?

Cadran Cowansage, software engineer at Y Combinator Blog

Y Combinator’s Cowansage attempts to understand why women tend to step out of technical positions more frequently than their male counterparts. Cowansage asked several female engineers about their past decisions to leave their technical position at a specific company or the industry entirely. Interestingly, many of the responses don’t specifically address gender-driven workplace conflicts or discrimination. Instead, many of the women attribute their departures to irreconcilable differences with company management.

Startups often lack formal HR departments. Impartial organizational roles, like senior HR employees, who are distanced from the executive team are valuable resources; these positions offer employees an outlet for voicing their complaints without fear of jeopardizing their job status. Additionally, many women left their previous engineering positions due to lack of shareholder attention to the project they were dedicated to. Another commonly voiced problem during the interviews was rejection of requests for a promotion or raise. The interviews revealed that many women were willing to leave their company when they learned that employees with less experience were earning higher salaries or bonuses.

Startups Increasingly Turning to Debt Financing Despite Dangers

Mikey Tom, Reporter, PitchBook

PitchBook’s Tom shares some insight from  2016 Annual VC Valuations Report. According to the report, median early-stage valuations and the tally of firms that exited the market at a lower valuation than their most recent valuation reached an all-time high. As Tom points out, “rather than raising a new equity round at a sub-optimal valuation or seeking a premature liquidity event,” startups are increasingly relying on debt financing for cash. In fact, excluding 2016, the number of startups composed of debt has increased since 2008. Notably, many of the massive tech unicorns, like Airbnb and Uber, raised billion dollar loans in recent years.

Tom acknowledges the attractiveness of debt financing for many startups, but he forewarns founders of the dangers of accumulating too much debt: “if a startup is unable to achieve the amount of growth it forecasts, the debt ends up acting as more of a time bomb than growth equity.”

Categories
Government and Policy McNair Center

Congress Turns Its Attention to Entrepreneurship and Innovation—But Does It Take Effective Action?

U.S. Capitol west side by Martin Falbisoner

AnnesGraphLegislation passed during the first three months of  the 115th Congress pays disproportionate attention to entrepreneurship and innovation. McNair Center research shows that in a typical congressional session, less than 2 percent of legislation introduced is relevant to E&I issues. As of March 23, three of the ten bills that have become law during the 115th Congress directly address entrepreneurship and innovation.

A focus on entrepreneurship and innovation issues does not alone make for effective policy. Of the three E&I bills that have become law, only one, the Tested Ability to Leverage Exceptional National Talent (TALENT) Act supports a proven program, the Presidential Innovation Fellows. The other two laws, the Promoting Women in Entrepreneurship Act and the Inspiring the Next Space Pioneers, Innovators, Researchers, and Explorers (INSPIRE) Act, are devoid of meaningful changes to public policy.

TALENT Act: Codifying a Proven Program

The TALENT Act is the most likely of the three bills to have real world impact. This bill, sponsored by Majority Leader Kevin McCarthy (R-CA23), codifies the Presidential Innovation Fellows program begun as an executive order under President Obama. This bill was part of McCarthy’s Innovation Initiative, a suite of legislation introduced in the 114th Congress. In an interview with Fortune, McCarthy described his goal for the initiative as, making government “effective, efficient and accountable.”

The McNair Center’s Julia Wang explains that Innovation Fellows are embedded in government agencies, working to effect internal change. Projects include making information about clinical trials for cancer drugs available to patients in a searchable website as part of the Cancer Moonshot, developing an interagency data portal for child welfare and creating Uncle Sam’s List, which enables government agencies to in-source services from other federal agencies.

Promoting Women in Entrepreneurship and Innovation

The lag in women’s participation in entrepreneurship and innovation is a matter worthy of public policy attention as the McNair Center’s Tay Jacobe details; however, the Promoting Women in Entrepreneurship Act and the INSPIRE Act do little to address these issues.

Women in the NSF I-Corps

nsf-i-corps-oct-20111
The 2011 pilot I-Corps program was a mixed gender group, although women do appear to be in the minority.

The Promoting Women in Entrepreneurship Act directs the National Science Foundation to “encourage its entrepreneurial programs to recruit and support women.” The NSF’s premier entrepreneurship program is the Innovation Corps (I-Corps). I-Corps uses Steve Blank’s Lean Launchpad method to train NSF-funded scientists to turn their research findings into entrepreneurial ventures. Scientists who successfully complete the I-Corps program can receive additional support for their ventures. NSF’s Small Business Innovation Research/Small Business Technology Transfer (SBIR/SBTT) programs financially support I-Corps.

When the bill was debated during the 114th Congress, the bill’s sponsor, Representative Elizabeth Esty (D-CT5), and the bill’s cosponsors did not present any evidence that the current NSF programs were failing to enroll women scientists and engineers. A picture of the 2011 pilot I-Corps program on Steve Blank’s blog shows a mixed gender group, although women do appear to be in the minority.

Several premier research universities, including Rice University, host I-Corps programs. The federal government requires that all participating universities are in compliance with Title IX, which prohibits sex discrimination in educational programs, in order to receive funding.

Hidden Figures No More: Women in STEM at NASA

The INSPIRE Act directs NASA to continue support of three current initiatives. All of these programs seek to encourage girls and young women to pursue careers in STEM. Two of these initiatives—NASA Girls and NASA Boys and Aspire to Inspire—provide interested students with virtual contact with NASA mentors. The third—the Summer Institute in Science, Technology, Engineering, and Research (SISTER)—is a week-long program for middle school girls at Maryland’s Goddard Space Flight Center.

Sponsored by Representative Barbara Comstock (R-VA10), this legislation directs NASA to continue supporting these programs, but does not mention expansion. The INSPIRE Act did not appropriate funds to support these programs, but funds were appropriated for NASA’s Office of Education in the agency’s fiscal 2017 budget, which became law on March 21.

President Trump’s budget proposal for fiscal year 2018 eliminates funds for the NASA Office of Education , although NASA Acting Administrator Robert Lightfoot promises that the agency will  “continue to use every opportunity to support the next generation through engagement in our missions and the many ways that our work encourages the public to discover more” even if funds are not appropriated for the Office of Education.

The INSPIRE Act requires NASA to submit a plan to Congress on outreach to women. This will encourage communication between female K-12 students and retired astronauts, scientists, and engineers. In the floor debate, both Comstock and cosponsor Esty cited the importance of visible role models in motivating  young women to pursue STEM.

Nonetheless, the bill’s narrow scope will limit the effects of the INSPIRE Act. If Congress removes NASA Education Office funding in fiscal year 2018, INSPIRE, which received bipartisan support, will only result in a report on educational activities that the agency would have difficulty funding.

Impact

All three acts passed Congress with bipartisan support. This suggests a shared interest in furthering government innovation and expanding access to careers in entrepreneurship and STEM. This support also implies that political leaders are prioritizing action on the rapidly expanding high-tech, high-growth sector. This sector now accounts for one fifth of the U.S. economy.

Would Congress be willing to go beyond the limited scope of these bills to effect truly innovative public policy? Past congressional sessions have devoted little attention these issues. However, Majority Leader McCarthy’s Innovation Initiative, including all three of the discussed bills, suggests that this neglect will not continue.

Categories
McNair Center Women

Wanted: More Women Entrepreneurs

Introduction

The increase of women in the workforce in the twentieth century drove U.S. GDP growth to new highs. However, as U.S. growth slowed, so did the rate of women entering the workforce. Pushing for equal representation in fields where women have been historically underrepresented may be the key to stimulating our economy.

Women’s entrepreneurship is one of these fields. Lauded by the Kauffman Foundation as an “economic tailwind that will give a boost to twenty-first-century growth” in the global economy, there is a lot of excitement surrounding the potential of women in entrepreneurship. By looking at characteristics of successful women entrepreneurs, we may gain a better understanding of how to make entrepreneurship more accessible to women.

Characteristics of Successful Women Entrepreneurs

The Kauffman Foundation and Stanford University uncovered some interesting results by surveying 350 founding CEOs, presidents, chief technology officers, and leading technologists of tech startups founded between 2002 and 2012. First, women in tech entrepreneurship are highly educated. Ninety-four percent have at least a bachelor’s degree and 56 percent have graduate degrees. Their educational training centers around business, the liberal arts, and STEM. Female entrepreneurs clearly represent a highly educated slice of the population. In comparison, only 33 percent of women in the United States possess a bachelor’s degree or higher; further, only 12 percent of women possess a graduate degree.

Performance

Research shows that female entrepreneurs experience success. On average, female entrepreneurs of all types (not just tech industries) perform seven percent better on the Kauffman Opportunity Entrepreneurship Share than male entrepreneurs. The KOES tracks the percent of new entrepreneurs who come from prior employment each year; these entrepreneurs leave their jobs to start businesses because they identified market opportunities. This indicates that women are better at identifying the market “gaps” where entrepreneurs thrive. Furthermore, women start their equally successful companies with 50 percent less capital than their male counterparts.

Nonetheless, some research finds that women entrepreneurs perform worse than men. Studies by Fundera found that women-owned businesses earn 30 percent less annual revenue than men. This could be creating a vicious circle, though; when companies make lower revenue, it is harder to access credit, making it more difficult to increase revenue in the future.

Gender Gaps

If women entrepreneurs tend to experience success, why are there so few women involved in entrepreneurship as a whole? Female-owned businesses only represent 16 percent of employing firms. Even then, these firms tend to be small, usually with employee counts in the single digits. Among high-growth, high-technology firms, women represent a mere 10 percent of founders.

https://www.flickr.com/photos/ges2016/27831680936
Penny Pritzker (U.S. Department of Commerce Secretary), Ruth Porat (CFO and Senior Vice President of Google and Alphabet Inc), and Ann H. Lamont (Managing Partner at Oak HC/FT) speak at the Global Entrepreneurship Summit in June 2016

Female entrepreneurs cite lack of available financial capital, lack of mentors or advisors, and the high requirements for time and effort as some of the toughest challenges in starting their businesses. Seventy-nine percent of women surveyed by the Kauffman Foundation reported using their own personal funds to start their business.

Male founders are more than three times as likely as female founders to secure financing through angel donors or VCs. Research at Babson College indicates that this difference may be linked to gender discrimination: “Because women entrepreneurs do not conform to the ‘role’ of the entrepreneur in the high growth venture, role incongruity may lead to greater perceived risk on the part of venture capital investors.”

Supporting Female Entrepreneurs

If women entrepreneurs are unable to secure funding on an equal basis with men, it may be impossible to ever see equal gender representation in entrepreneurship. We need to address gender-based biases of VC firms and other investors. Recruiting more women to the venture capital industry could help reduce unintended gender discrimination when making investments. Employee bias training programs may also help in this process.

Private and nonprofit efforts to encourage women’s leadership and entrepreneurship can be helpful as well. Initiatives like Women’s Entrepreneurship Day, the Women’s Entrepreneur Festival, and the Microsoft’s Women Think Next network are all examples of non-governmental programs that try to address women’s representation issues. Lean In Circles—small support groups made up of women in local communities and around the world— also serve as valuable tools to promote women’s economic involvement.

Government programs may also be successful in jump-starting greater women’s involvement in entrepreneurship. The City of Atlanta provided 15 women entrepreneurs the opportunity to incubate their businesses for 15 months through their the Women’s Entrepreneurship Initiative in 2016. On a federal level, implementation of more programs like the State Department’s African Women’s Entrepreneurship Program may benefit women, especially those in minority groups. One of the greatest challenges for women entrepreneurs is finding mentorship opportunities; local and state government initiatives to pair mentors with women entrepreneurs could help address this problem.

The U.S. economy is at a tipping point. In early 2016, Forbes magazine pointed out that female entrepreneurs are an “under-tapped force that can rekindle economic expansion.” However, despite strong evidence for growth potential and data supporting female entrepreneurs’ power, many barriers still exist. Through integration of more women into entrepreneurship ecosystems, we can achieve a brighter economic future for all.

Related Posts

To learn more about treatment of women within top tech companies, see the McNair Center’s blog post here.

To learn more about women in STEM fields, see the McNair Center’s blog post here.