These Are the 5 Best—and Worst—States for Women-Owned Businesses in America

These Are the 5 Best—and Worst—States for Women-Owned Businesses in America

Over the past two years, the number of women-owned businesses in the U.S. has noticeably grown — up to roughly 13 million of them today, according to the Women’s Business Enterprise National Council.

But according to a recent study, the conditions are better for women-owned businesses in some states than others, with California, Colorado and New York leading the way.

The study, from boutique lending firm Clarify Capital, ranked the best U.S. states for women-owned businesses based on metrics like percentage of female-owned small businesses, women-to-men pay ratios, female unemployment rates, number of female-owned companies per 10,000 residents in each state and how many women-owned businesses in each state pull in $1 million or more in annual revenue.

Here are the five best states for women-owned businesses, according to those rankings:

  1. California
  2. Colorado
  3. New York
  4. Florida
  5. Vermont

To an extent, California’s presence at the top of this list is unsurprising: It’s the home of Silicon Valley. California boasts more women-owned businesses with over $1 million in annual revenue than any other state, and ranked fifth among all 50 states in terms of its gender pay gap.

That pay gap stat is significant. California has made a strong push in recent years to narrow the state’s gender pay gap, including signing the Equal Pay Pledge in January, which is aimed at improving pay equity among the state’s government workforce. Women workers in the state currently earn roughly 88% of the wages of their male counterparts, compared to an 81% nationwide figure, according to the U.S. Census Bureau.

A recent report from Citigroup found that closing the gender gap could add as much as $2 trillion to the global gross domestic product while creating up to 433 million new jobs.

Clarify Capital also noted that California is one of the country’s top states for funding female-founded startups — averaging $10.2 million per deal for female founders in recent years, according to numbers from PitchBook. That’s second only to Massachusetts’ $13 million average, and a big deal in its own right: Only about 2.1% of venture capital dollars in the U.S. went to female-founded startups in 2021, according to Pitchbook.

In second place is Colorado, which has seen a 52% bump in women-owned businesses since 2002, Clarify Capital noted. Colorado also boasts the most female-owned businesses per 10,000 residents. New York is third, offering the second-best women-to-men pay ratio (85%) and the third-highest number of women-owned businesses bringing in at least $1 million in annual revenue.

On the other end of the spectrum, the states at the bottom of the ranking suffer from higher female unemployment rates and women-to-men pay ratios that fall below the national average. Here are the worst states for women-owned businesses, according to Clarify Capital:

  1. West Virginia
  2. Mississippi
  3. Alabama
  4. Arkansas
  5. Kentucky

West Virginia ranked dead last, driven largely by finishing 50th in both female unemployment rates and the number of women-owned businesses per 10,000 residents. Mississippi ranked 49th overall, with a particularly poor showing in terms of its gender pay gap: Women in the state make just 77% of their male counterparts’ wages, which is below the national average.

The same is true in Alabama — 48th on the overall ranking — where the women-to-men pay ratio is 75%, according to the Census Bureau.

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