October is National Women’s Small Business Month, a time to highlight the benefits that women bring to entrepreneurship. This year’s celebration comes at a pivotal time: as Gusto data shows, women have fueled the post-pandemic surge in entrepreneurship across the country, bringing benefits to their workers and their communities. But female business owners also face unique challenges, and they both need and deserve additional support.
This post, drawing on several years of Gusto’s research on female entrepreneurship, highlights the important role of women business owners in the economy: not only are women starting businesses at increased rates, but they are creating an economy that better serves worker and community needs in the process. They tend to start businesses in the Healthcare, Education, and Nonprofit sectors at higher rates, and they allow workers increased flexibility on the job.
There are still, however, steps we can take to help the new business owners succeed over the long term: most importantly, closing gender gaps in access to capital investments will help women start more businesses and thrive in the years ahead. Read our guide sharing 20 funding resources for women-owned businesses here.
Women Have Made Up Nearly Half of Entrepreneurs Since 2020
One of the most dramatic economic shifts since the pandemic has been the unprecedented surge in entrepreneurship, and Gusto data has confirmed this rise has been driven largely by women. In Gusto’s survey of 2020 entrepreneurs, we found that women made up nearly half (47%) of new business owners, up from 29% in 2019 using comparable pre-pandemic estimates from the US Census. This increased rate of entrepreneurship among women has continued three years on, with women making up 49% of new business owners in 2021 and 47% in 2022.
Motivations for Entrepreneurship are Changing with the Economy
Although the increased rates of female entrepreneurship have remained steady since 2020, the reasons these women are turning to entrepreneurship have shifted as the economic landscape changes.
- In 2020, amid widespread, pandemic-induced layoffs, immediate financial concerns dominated the reasons women started new businesses: 32% of women started a new business because they were laid off.
- In 2021, childcare concerns was the top reason women started their own businesses: 28% of women with school-aged children created their business in response to increased childcare responsibilities.
- Finally, in 2022, women continued to make up nearly half (47%) of new business owners, with the need for flexibility dominating the reasons these women turned to entrepreneurship (64% selected that reason as why they started a business).
This shift in motivations is an encouraging trend, as it suggests the sustainability of this rise in female entrepreneurship. Rather than seeing a one-time surge motivated by the pandemic and specific financial needs, women have instead turned to entrepreneurship out of new needs and motivations over the last two years – indicating that, as the economic landscape continues to shift, women will continue to take advantage of the flexibility and autonomy that business ownership allows.
Smaller US Cities are Driving this Surge
Although women have driven the increase in entrepreneurship across the country, specific cities and regions have seen larger increases in the share of women business owners. Using platform data from Gusto’s 300,000+ small and mid-sized businesses, we examine the increase in the share of all women business owners (not just new business owners) from 2019-2023. The table below shows the 10 metro areas, among the top 50, that have seen the largest increase in the number of new women entrepreneurs.
Notable on this top 10 list is that the largest city here is Baltimore, the 20th largest metro – all the remaining cities are smaller; Baltimore is also the only large coastal city. Gusto’s research has previously found the pandemic induced a shift in economic growth from America’s largest cities on the East and West coasts to smaller cities in the Midwest and Southeast.
This data suggests that, as women drive the surge in entrepreneurship, they are driving the renewal of economic growth outside of the country’s large economic hubs, bringing new dynamism to the Midwest and Southern US.
Top 10 Metropolitan Areas With the Largest Increase in Share of Women Business Owners
| Metro Area | Share of Female Owners, 2023 | Share of Female Owners, 2019 |
| Louisville, KY | 32% | 24% |
| Oklahoma City, OK | 30% | 24% |
| Hartford, CT | 30% | 24% |
| Columbus, OH | 30% | 25% |
| Raleigh, NC | 29% | 24% |
| Nashville, TN | 31% | 26% |
| Baltimore, MD | 36% | 31% |
| Charlotte, NC | 30% | 25% |
| Pittsburgh, PA | 30% | 25% |
| Portland, OR | 35% | 30% |
The Benefits of More Women-Owned Businesses
This rise in women’s business ownership is encouraging, not only because self-employment has been a way for these entrepreneurs to earn a living, but because, as Gusto data shows, women often build businesses that better serve their employees and communities.
First, we’ve seen each year of this survey that women are more likely to create companies in Personal Services (Retail, Food & Beverage, etc.) and in Community Services (Healthcare, Education, and Non-Profits). In 2023, one-third of women-owned businesses were in Community Services, compared to 19% of male-owned businesses. These firms help solve pressing challenges in the communities where they operate.
Second, we noted above that women have started businesses primarily out of the need for flexibility in their own lives. One data point from the survey of 2022 entrepreneurs shows that these women are, in turn, providing flexibility to their employees. In this survey, we asked new business owners if they are offering a hybrid work schedule, and found that women are about one-third more likely than men to offer a hybrid work schedule – one further example of the ways in which women business owners bring their own perspectives and experiences to entrepreneurship.
Disparities in Capital Access Remain a Barrier to Growth
Although it’s encouraging to see more women start new businesses, there are steps we can take to help women continue to thrive in this new entrepreneurial ecosystem. In particular, Gusto’s survey data shows that women are still disproportionately left out of opportunities for private capital.
Among businesses started in 2022, we saw nearly equal rates of business funding among every source outside of private capital. While women and men funded their businesses with savings, private loans, and other sources at similar rates, men received capital investments at a 2.3 times higher rate than women 14% of male owners funded their business at least partially through private capital investments, compared to just 6% of women. These gaps represent a huge disparity in funds between men and women: in 2022 alone, US companies raised just over $240 billion in venture capital.
These forms of investment are key to growing and expanding – and helping women who want to access these funds will be key to creating a more inclusive economy in the long-term.
Large Disparities in Capital Financing Exist Between Men and Women
| Source of funds | All | Men | Women |
| Personal Savings | 63% | 61% | 66% |
| Private Business Loan | 10% | 10% | 9% |
| Government Stimulus/ Unemployment Insurance | 1% | 1% | 1% |
| Loans from family/friends | 5% | 5% | 5% |
| SBA-Backed Loan | 3% | 4% | 2% |
| Private Capital Investment | 10% | 14% | 6% |
| No funds were needed | 23% | 23% | 22% |
What Policymakers Can Do to Support Female Entrepreneurs
As Gusto data, shows, women play a vital role in the small business ecosystem, providing high-quality jobs in industries that serve the community – and for this reason alone, they deserve more support than they receive today. An important way that policymakers can help women business owners today is by creating pathways for women to develop relationships with financial institutions. Access to private capital and other forms of funding are often based on formal and informal networks, and women are all too often left out of those networks. By both investing more in groups that effectively create networks of financial professionals and increasing the awareness of these organizations, policymakers can help women make the connections they need that lead to funding opportunities. The U.S. Small Business Administration’s funding organizations – including Women Business Centers (WBCs), Small Business Development Centers (SBDCs), and SCORE – would be well-positioned to create pathways and communities that connect women business owners with financial institutions.
Also, see our support letter for the Small Business Technology Advancement Act.