28 July 2021
Individual Strength, Collective Power
Why investing in underrepresented communities is good for business.
by Kate Visconti
It is my belief that it will take the success of all types of businesses led by diverse leaders from all segments and communities to harness the power, creativity, innovation, and collaboration we all need to change the world for the better. As Rakhi Voria, Worldwide Inside Sales Business Manager with Microsoft, says, “While we may be individually strong, we are collectively powerful.”
So, before I jump right in to speak about the significance of recently being certified as a Women-Owned Small Business (WOSB), I want to be clear about something important to me. As the world focuses more intently on diversity, equity, and inclusion and concerted efforts toward supporting businesses from underrepresented communities, I want to ensure this topic does not become divisive. That is not my intent, so I hope this blog will shed some light on why programs that promote specific types of small businesses are so important. However, if we are not mindful as we continue forging ahead on creating equal access to compete for business opportunities for all communities, a reverse effect may impact commerce in a way that is neither progressive, nor rewarding for anyone.
If you read my first few blogs about the journey to start Five to Flow, you already know it was not an easy one. Having worked most of my career for organizations led by men (albeit some absolutely amazing men who are focused on continuing to close gender and diversity gaps), I was not sure I could compete in the market against male leaders. Most of the decision-makers at our customers over the years have also been men. Though I persevered in sales through professional relationships and was very successful, I always fancied how much of the deals were actually done at the golf course or over cigars and whiskey at the gentleman’s club. Since I am a terrible golfer and don’t drink much, I felt like maybe I would not have all of the same access to conversations where buyers make their decisions. I was reminded of this fear recently as I listened to Erin Horvath on episode 24 of the Customer Obsessed podcast (minute 28 if you want to check it out). I was not 100% sure I could sell fast enough to support a global company as I have never truly known if our customers were buying me or the brand that I served.
I first became interested in formally certifying Five to Flow as a Women-Owned Small Business when I began researching our options between staying self-funded versus finding an investor and how to best compete in the marketplace against larger or longer-established firms in the consulting industry. I stumbled upon a few studies that were quite shocking despite my understanding of the chronic minority and gender inequities in the workplace.
According to a TechCrunch study, “In 2019, less than 3% of all VC investment went to women-led companies, and only one-fifth of U.S. VC went to start-ups with at least one woman on the founder team. The average deal size for female-founded or female co-founded companies is less than half that of only male-founded start-ups. This is especially concerning when you consider that women make up a much bigger portion of the founder community than proportionately receive investment (around 28% of founders are women). At the intersection of race and ethnicity, the figures become even more concerning: Black women founders received 0.6% of the funding raised since 2009, while Latinx female founders saw only 0.4% of total investment dollars.”
Similarly, many studies I have read, such as one from the Ewing Marion Kauffman Foundation, report ongoing struggles for minority-owned businesses to access the much-needed capital to thrive.
“Minorities are disproportionately hurt by the cost of and lack of access to capital. While approximately 16 percent of minority-owned businesses report profits being negatively impacted by the cost and lack of access, only about 10 percent of nonminority-owned businesses report the same. Black entrepreneurs, in particular, are almost three times as likely as whites to have profitability hurt by lack of access to capital and more than twice as likely as whites to have profits negatively impacted by the cost of capital.”
This information, in addition to doing my own prospecting as an unknown brand, being a woman in “tech,” and navigating the process to procure funding, has been daunting since the day I decided to launch Five to Flow. I avoided the funding track and instead decided to focus on networking with the leadership team’s past customers. Our relationships, competitive and differentiated selling, and working as lean as possible has made it possible to fund the business through my own savings and organic growth. This is when I decided I needed to take advantage of the many resources available to small business owners of which I suspect many entrepreneurs are unaware. One of those is the certification of being women-owned and the benefits that come with this governmental designation. Many private and public organizations are committed to selecting a certain percentage of their suppliers among these types of small businesses to offer a more even playing field but also to tap into diverse talent to which they may not have had access to otherwise. According to the Matchbook article, “The Benefits of Working with a Women-owned Business Enterprise (WBE),”some of the positive outcomes for the hiring businesses are:
- Earning a positive perception in the marketplace: Tapping into unique and diverse markets shows “your company’s commitment to working in diverse markets and furthering economic growth in local communities.”
- Realizing tax benefits: “As an initiative to support and grow women-owned businesses, the federal government provides tax incentives to companies who conduct business with a WBE/WOSB Certified or minority-run business.”
- Growing through innovation and creativity: “Most WBEs are adaptive with how to strategically support current efforts and initiatives down the road.”
- Leveraging shared organizational resources. The Women’s Business Enterprise National Council (WBENC) and the SBA both support and provide resources for small businesses, enabling them through networking, training, workshops, and collaboration with organizations across the United States.
If you are an investor looking for a business to support or are a business decision-maker looking for a supplier and you are still not convinced, consider this:
“Striving for gender equality, both within the walls of VC funds and in the founder community, is also better for businesses’ bottom line. In fact, a study by Boston Consulting Group found that women-founded start-ups generate 78% for every dollar invested, compared to 31% from men-founded companies.”
If you are a women-owned business seeking resources, check out the national not-for-profit, Women for Economic and Leadership Development (WELD). They have a wealth of knowledge and resources, and they host professional development events to strengthen the ongoing case for finding women-owned business support. For example,“Research performed by US Aid From The American People shows that ‘a woman multiplies the impact of an investment made in her future by extending benefits to the world around her, creating a better life for her family and building a strong community.’ This research also uncovered that ‘countries where women’s share of seats in political bodies is greater than 30% are more inclusive, egalitarian, and democratic.’
Even though the process of being certified by the Small Business Administration was lengthy and required a lot of paperwork and fees, my team and I persevered. We truly want to make a difference on all levels and continue demonstrating why diversity is so important, well beyond the obvious reasons. For many more measurable results— in addition to the immeasurable outcomes— please visit Why Diversity Matters and learn more about the amazing impacts of a diverse workforce, board, and partners. If not for my diverse team of individuals of various backgrounds, cultures, ethnicities, LGBTQ+ status, ages, genders, etc., I am 100% positive we would not be the innovators we are. Each of our individual strengths is what creates our collective power.