Late last month, SmartAsset released a study that ranked the Twin Cities as the best place for women entrepreneurs in the country.
On social media, the study stirred up a strong response from local female entrepreneurs. Some said it painted an inaccurate picture of the challenges women face here and around the country. So, TCB checked in with area entrepreneurs, investors, and economic development leaders to get their take on the climate for women entrepreneurs in the Twin Cities.
“People read that headline [‘best place’], and they may think, ‘Okay great, we’re doing good work, and we don’t need to work on this anymore,’” says Elyse Ash, founder and CEO of infertility support startup Fruitful Fertility.
Ash argues that comparing one deficient place to another isn’t necessarily a comprehensive assessment.
Melissa Kjolsing, CEO and co-founder of substance abuse recovery software company Recovree, agrees. She notes the ranking could have been titled “least worst cities.”
Still, that’s not to say it’s all bad news in the Twin Cities. For instance, some women business leaders say the area has a good community for female entrepreneurs.
“There’s a strong network of women founders,” says Kjolsing. “If women want to get connected to another woman founder, it’s very easy to do.”
Michelle Maryns, founder and CEO of small business-focused software company We Sparkle, adds that the number of female leaders, female-focused events, organizations, and other resources for women immediately impressed her when she moved to the Twin Cities eight years ago.
One resource that Akinda Johnson, founder and CEO of swimwear maker Akinda Co., appreciates is access to local business accelerators. Her company is currently participating in Beta.MN’s accelerator, which doesn’t require an equity fee. That runs in contrast to accelerators she’s seen in the Bay Area, for instance.
There’s also an assortment of women-led venture funds in the Twin Cities, such as the Sofia Fund, Capita3, and the local chapter of Pipeline Angels.
The Sofia Fund, for one, has invested in 18 Minneapolis-St. Paul-based women-led businesses since its founding in 1998, when it operated under another name. In total, the fund has invested in 25 area businesses, according to Cathy Connett, CEO and managing partner of the Sofia Fund.
“For a city our size to have [even] two funds focused on investing in women, that raises the visibility, mentorship, and focus on women-led companies and women entrepreneurs,” says Capita3 co-founder Sarah Russick.
Russick adds that the funds don’t just help entrepreneurs; they help female would-be investors too, as they’re often cut off from investment opportunities. Women-focused funds give them a place to put their dollars, she says.
And of course, there’s been plenty of growth in the Twin Cities’ female entrepreneur space. For instance, there are now more women trying to start businesses. The number of women-led businesses that the Sofia Fund has considered for investment totaled about 200 over the first six or seven years of the fund’s existence. Now, Connett says she typically looks at 200 a year. What’s more, the U of M’s Carlson School of Management’s statewide entrepreneurial competition MN Cup has recorded its highest percentage of female applicants yet—43 percent of 1,661 candidates.
However, there are still plenty of ways the Twin Cities could be better for women entrepreneurs.
The region ranked 14th on the SmartAsset study for the percentage of businesses that are women-owned. Of the 211 total companies founded in the Twin Cities between 2013 and 2018, only 18.5 percent had women founders or co-founders, according to Amanda Taylor, director of research for Greater MSP.
Taylor says addressing that gap is a key goal of the new startup-focused community initiative Forge North.
“I'm so glad that we're so ranked so highly [on this study]. But we know there's opportunity to improve,” says Taylor. “There’s more work to be done."
Meanwhile, women entrepreneurs in the Twin Cities region face a few specific challenges.
For instance, there simply isn’t as much venture capital here compared to the coasts, according to Kjolsing. She says it’s widely known that most dollars—perhaps more than 90 percent—go to Boston, New York, and California.
That means competition is fierce between all entrepreneurs.
On top of that, Midwest investors tend to be more risk-averse with their dollars, local entrepreneurs say.
“If you go to Silicon Valley, there’s so much money that they throw it at the wall and see what sticks, and if a lot of it falls to the floor, it doesn’t matter,” says Connett. “Whereas here, there may be more conservatism.”
That mentality is particularly problematic for female and minority entrepreneurs here because they’re often seen as risky investments. So, trying to sway a particularly risk-averse investor creates a layer of difficulty entrepreneurs elsewhere may not face.
The idea that women and minority entrepreneurs are risky bets is an intrinsic bias that local entrepreneurs say they’ve seen firsthand. It’s often cited as a reason why women founders received only 2.2 percent of the $130 billion total in venture capital money invested in the U.S. in 2018, according to a report by Fortune Magazine.
That trend of unequal venture capital access is echoed in smaller scale in Minneapolis-St. Paul, where women-founded businesses raised just 3 percent of the $3.5 billion in total venture capital between 2013 to 2018, according to Greater MSP.
During Twin Cities Startup Week, several entrepreneurs said they’ve experienced sexism, which leads to a disproportionate access to funds. After all, most investors are male, and female entrepreneurs say that more than once, male investors have been quick to dismiss or degrade them with sexual advances. And when women aren’t dealing with inappropriate behavior, they still have to work harder to convince an investor.
“Men get investment based on potential, and women get investment based on proof,” says Ash. “So while we’re trying to hit all these metrics—[revenue, followers, growth]—men can already start putting dollars into building their team, finding an office, and being able to scale. It’s a disadvantage [to women].”
Ash says male investors have even pointed her to a women-led fund as an alternative to giving up their own dollars. For that reason, Ash and Kjolsing say the mere existence of women-led funds isn’t enough; male investors should still also be creating opportunities for women.
“We need to learn how to integrate with networks that already exist rather than doing our own thing in our own corner,” says Ash.
Kjolsing says changing investors’ minds about women entrepreneurs and improving the overall landscape for women entrepreneurs in the Twin Cities will take collaboration.
“If a collective group of leaders made this something they cared about or were passionate about—because it is good for the overall business community—we can start to open doors [for women], to customers, other types of investors, board seats, all these things,” she says.