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Fewer women starting businesses may not be all bad
June 8, 2015, 3:35 pm
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The percentage of new businesses started by women fell in 2014 to pre-recession lows, according to a new report. Yet the decline may signal the beginning of a positive trend in corporate America. For the past 20 years, women have been launching new businesses at a higher rate than men. When the recession hit in 2008, small businesses were arguably impacted the most, and droves of female entrepreneurs responded to the crash by launching a new venture. Analysts largely viewed this trend as a good thing: More women starting companies boosts job creation and strengthens the general economy.

So now that fewer women are starting businesses, critics are quick to point to this as negative for both women entrepreneurs as well as the economy. Yet it is important to consider why women launch their own companies in the first place. According to a recent PayPal survey, more than half of female entrepreneurs in America start or want to start their own business to mainly achieve one thing: work-life balance. With countless women unable to juggle having a family as well as a career under the constraints of American corporate culture, more women are choosing to become their own boss.

So it could be that corporate America may just be doing a better job of creating flexible work arrangements for top female talent. In turn, fewer women feel the need to create their own company. Tech companies in Silicon Valley are leading the charge with longer paid maternity leave and other policies that allow all workers to chart their own path up the corporate ladder. The same goes for iconic Fortune 500 firms like American Express and Cisco.

As it becomes more par for the course for companies to hire Chief Diversity Officers as well as have human resources critically think about the needs of different types of workers, more women may begin to feel like they can succeed in the traditional workplace. Equal pay has also become a larger topic of discussion among the nation's top employers. Some CEOs are even guaranteeing equal pay for men and women. This is an important to keeping female talent as four in 10 women think equal pay is the top issue in the workplace, according to Gallup.

Still, it is critical for us to consider how the decline in new women-run businesses relates to the difficulty women face when trying to raise capital. Just 3 percent of venture-capital funds went to women-run businesses from 2011 to 2013, which could be why fewer women successfully started their own firm last year. As LinkedIn Influencer Whitney Johnson pointed out in a recent post, we need more investors to start viewing investing in women-run companies as a real business priority as opposed to a cause or "pseudo pity party."

Another alarming data point from the new report is that the average number of businesses started by American women between the ages of 20 to 34 fell nearly 27 percent since 1996. This could be the sign of a confidence issue among young US females that still needs to be addressed.

Generally speaking, when you see fewer women opting for a professional goal, the alarm bells should go off. But in this case, it's important to consider the root reasons why entrepreneurs are launching their own venture to begin with. The data shows that for many women, starting a company may be a matter of necessity as opposed to an act of volition.

Caroline Fairchild
New Economy Editor at LinkedIn
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