The Top 10 States For Women-Led Startups In 2023

As we look ahead to 2024, the 2023 data emerging about women-led startups appear to indicate that last year’s trends are continuing. More women-owned businesses are gaining venture capital deals than ever before — and the trend of a downward trajectory in how much women receive in venture capital funds also appears true.

According to our data report, 2022 would have been the best year ever for venture capital funding for businesses founded by women had 2021 not set the bar so high. Despite tightening interest rates, companies founded or co-founded by women netted over $36.3 billion for the year ending in October, down from 2021’s $42.6 billion.

While venture capital is still largely clustered in big cities in California, New York, and Massachusetts, money is traveling to women in the Midwest and Mountain regions. Chicago’s healthy venture capital scene propelled Illinois into Merchant Maverick’s 10 Best States For Women-Led Startups in 2023 for the first time. Meanwhile, women entrepreneurs in Wyoming are taking charge despite a challenging business climate.

Compared to our findings in our 2022 women-led startup report, the locus of female startup energy moved somewhat west- and southward this year. Many of last year’s Top 10 made this list this year as well, including Colorado (our No.1 state for the third year in a row), Texas, Florida, Washington, California, Virginia, and Arizona. They were joined by North Carolina, Wyoming, and Illinois.

At the same time, the Northeast lost its two representatives on our list (Maryland and Massachusetts), with New York leading the region at No. 12. While venture capital investment remains strong in the region, it appears to be facing some headwinds when it comes to unemployment and startup survival rates. While reports of the region’s demise may be greatly exaggerated, there could be trouble ahead for the Northeast when it comes to retaining its footing in the post-COVID world.

Key Findings

• Venture capital funding to female (co-)founded startups fell 15% in 2022. However, 2022 was the second highest allotment of venture capital funds to female (co-)founded startups on record, with $36.3 billion allotted through October. This speaks to just how large 2021’s allotments were.
• Colorado remains the most female entrepreneur-friendly state for the third year in a row. Despite a relatively high unemployment rate this year, Colorado ranks well in all of our other metrics, with strong participation by women in leadership roles and resilient startup hubs in Boulder and Denver.
• The range of unemployment rates between states was less pronounced this year. Unemployment fell broadly across the country in 2022 as pandemic restrictions eased, with patterns changing as well. In 2021, the difference between the highest (Nevada) and lowest (Nebraska) was 5.5%. In 2022, the difference is 2.5% between the highest (Illinois and Nevada) and the lowest (Minnesota).
• Wyoming and Illinois are this year’s most improved states among the Top 10. Women in Wyoming are starting businesses and overseeing a high percentage of the state’s employees. Meanwhile, Chicago’s healthy, capital-rich startup scene appears to be paying dividends to female entrepreneurs in Illinois.
• The Northeast is absent from the Top 10 this year. New York, Vermont, and Massachusetts narrowly missed the Top 10, landing at numbers 12, 13, and 14, respectively. While the Northeast didn’t perform terribly, thanks to strong VC investment and/or female participation, the region as a whole has not been a beneficiary of pandemic-era trends.

To accurately gauge the best states for women-led startups, we considered an array of gender-specific metrics:

• Total venture capital in the past five years invested in women-led startups
• Percent of employer firms led by women
• Percent of employees at women-led firms
• Percent of women self-employed in their own business
• The average income of women self-employed in their own business

We also included several general indicators, including each state’s startup early survival rate, income tax rates, and unemployment rates.

The Top 10 States For Women-Led Startups In 2023

1. Colorado

Overall score: 84.8

Last year's rank (change): 1st (0)

Colorado maintains its position as the best state for women-led startups for the third year in a row and has even improved its overall score from last year (75.2). While it doesn't lead in any one metric, Colorado remains the only state to rank in the top 10 for all five gender-specific metrics. With $3.3 billion allocated to women-led startups in the last five years (4th), 2.5% of Colorado women owning their own firm (2nd), and strong average earnings for women CEOs (4th), the Centennial state is looking pretty secure at the top of the heap.

2. Washington

Overall score: 81.6

Last year's rank (change): 4th (+2)

Washington had moved down our list to the number four position but has regained its second-place standing. One reason for the bump is that the Evergreen State now holds the number one spot for business survival rate (89.2), which is a huge shift from its previous position of last place. Washington is also tied with Texas for its lack of state income tax (1st) and ranks fifth with its $4.4 billion in venture capital investments toward women-led startups — a vast improvement. The state is also holding steady, with 29.5% of businesses owned by women (5th). Those reasons keep the state at the top of the pack despite Washington's moderately high unemployment rate (31st).

3. California

Overall score: 71.7

Last year's rank (change): 7th (+4)

California improved its position on our list significantly this year, largely on the strength of its venture capital scene. Indeed, Californians have received 47% of all venture capital allotted to women in the US over the past five years, a total of $74.9 billion (1st). Women entrepreneurs in California also benefit from strong earnings (6th) and a relatively high business survival rate after one year at 82.6% (9th). Despite the potentially punishing taxes (50th) and high unemployment rate (36th), California remains a powerhouse when it comes to entrepreneurship.

4. Arizona

Overall score: 71.5

Last year's rank (change): 9th (+5)

The Grand Canyon State moved up five spaces this year primarily due to ranking third in women-led businesses (30%). Like years past, Arizona shines for its consistency — ranking no lower than the top 20 for any metric other than unemployment (34th). In Arizona, 20.41% of employees are led by a woman (15th), and the state ranks 16th in the nation for average income ($52,972). One thing to note: While Arizona is ranked 17th for its investment into women-led startups over the past five years, its venture capital investments were significantly lower this year than in years past. If that trend continues, it could be difficult for Arizona to remain a top contender.

5. Texas

Overall score: 69.7

Last year's rank (change): 2nd (-3)

The Lone Star State has fallen slightly from its lofty third-place position in 2022 to a still-respectable No. 5. Texas boasts the strongest venture capital scene for women outside of California and the Northeast, with $6.5 billion invested in the last five years (4th). Additionally, women solely lead 22.11% of all employees working for a firm (5th) in Texas. While high-earners will enjoy Texas's lack of income tax (tied for 1st), the state's high unemployment rate (36th) and relatively low rate of female business ownership (29th) are keeping it from the Top 3.

6. Virginia

Overall score: 69.1

Last year's rank (change): 10th (+4)

A top state for women-led businesses in 2021, Virginia slipped last year and was nearly pushed out of the top 10. However, this year the state finds itself right back in the middle of the pack. Virginia's business survival rate is still fairly low at 79.5% (36th), but the state has a low unemployment rate (9th) and a decent income (12th). It is also in the top ten (8th) for percentages of businesses owned by women, and 20.67% of employees are led by women (12th). Old Dominion also ranks 14th in investments, with a little over one billion dollars going to women-led startups.

7. Wyoming

Overall score: 68.2

Last year's rank (change): 20th (+13)

Crashing into the top 10 is dark horse Wyoming. While it's a relatively unforgiving place to do business, with just 76.6% of startups surviving after the first year (48th), the Equality State lives up to its name in a lot of ways. Wyoming leads the nation in the percentage of women who own a business at 2.61% (1st), and a quarter of all employees in the state are led by a woman (2nd). Women entrepreneurs who can survive the rugged business climate and limited capital availability — $101 million over the last five years (34th) will, of course, appreciate the lack of state income tax (tied for 1st).

8. Florida

Overall score: 67.7

Last year's rank (change): 3rd (-5)

Florida lost five spaces this year due to increased competition, not because any of its metrics did poorly. As a matter of fact, Florida's overall score increased this year due to its solid overall percentage of women who own businesses (3rd), its commitment to venture capital investment (7th), its low unemployment (9th), and its tie for the lowest tax rate (1st). Where the Sunshine State could improve is in its overall income (ranking 37th) and its middle-of-the-pack business survival rate (29th).

9. North Carolina

Overall score: 67

Last year's rank (change): 17th (+8)

North Carolina has established a toe-hold on the Top 10 list this year, shooting up eight places. While the Tar Heel state doesn't dominate any one metric, it makes a respectable showing in many. For example, 28.2% of all employer firms in the state are led solely by women (9th), and 20.82% of employees are led solely by a woman (11th). North Carolina also lacks any major weaknesses among the metrics we measured, though it does fall into the bottom half of states when it comes to average income (29th) and unemployment (31st).

10. Illinois

Overall score: 64.6

Last year's rank (change): 23rd (+13)

Illinois is moving on up our list — the Prarie State improved its ranking by thirteen spots by drastically improving its business success rate (2nd versus 22nd in 2022) and making gains in venture capital investments (9th). It is also still in the top 20 for average income (14th) despite its significantly high unemployment rate (tied for last with Nevada). While the state is still ranking in the middle for women who own businesses (23rd) and the number of employees led by a woman (24th), the improvements show that Illinois is shifting in the right direction.

The Worst 10 States For Women-Led Startups In 2023

41. Nebraska (35.9 Overall Score): A scarcity of capital (45th) and a poor survival rate for startups (49th) have sent the Cornhusker State tumbling down to the bottom ten despite relatively high business ownership among women (9th).

42. Michigan (35.1): Unemployment is high (41st), and income is low (40th) for Michigan. In addition to those metrics, only 16.29% of Michigan employers are led by women (42nd), and women own 23.3% (24th) of businesses. However, the Great Lakes State does rank 15th for venture capital investments.

43. South Carolina (34.7): South Carolina's relatively high rate of startup survival (12th) isn't enough to overcome its low rate of business ownership among women (40th) or the fact that women lead a mere 14.84% of employees in the Palmetto State.

44. North Dakota (34.3): In Roughrider Country, the 0% invested in women-led businesses lands them at the bottom of the entire nation (50th). While North Dakota does enjoy a low unemployment rate (3rd), its income (45th) is near the bottom, and businesses don't have a healthy survival rate (41st).

45. Arkansas (34.1): The only metric for which Arkansas landed in the top 50% of states was in the percentage of women who own a business firm (22nd), with income (47th) and capital investment (46th) particularly lacking.

46. Oklahoma (32): In the Sooner State, only 15.69% of employees are led by a woman (45th), and only 1.14% of women in the state own a business (47th). Income (44th) and investment dollars (42nd) are also low despite the state's healthy business survival rate (13th).

47. West Virginia (31.8): Even though 21.13% of employees in West Virginia are led by women (10th), the state ranks dead last in its percentage of firms run by women (50th) and second to last in investment (49th).

48. Tennessee (30.2): Tennessee ranks in the middle of the pack for investments (25th) and business survival rate (28th) but ranks 50th for the percentage of businesses owned by a woman and 48th for employers being led by a woman (14.46%).

49. Alabama (28.9): Low unemployment (9th) is a bright spot in an otherwise difficult environment for women entrepreneurs in Alabama, which lags in ownership amongst women (43rd), income (42nd), and one-year startup survival rates (42nd).

50. Mississippi (24.1): The Hospitality State is not a very hospitable place to be a woman starting a business. While businesses that do make a go of it find a healthy survival rate (10th), Mississippi is at the bottom of most other metrics. It is 47th for firms led by women, dead last (50th) for employers led by a woman, and 48th for investment into women-led businesses.

Raw Data

Map View Of All 50 States

Complete Ranking Of All 50 States

Methodology

For this report, we gathered data from eight separate metrics for all 50 states. The data for each metric was normalized from 0-100 so that the highest-ranked state within a given metric had a score of 100 and the lowest-ranked state had a score of 0. These normalized scores were then multiplied by specific weights to achieve the overall score for each state.

Below are the eight metrics we chose, along with the percentage used to calculate each weight:

• Percent Of Employer Firms Led By Women (15%): This metric compares the number of employer firms led solely by women to the number of employer firms led solely by men in the state, per data from the Census Bureau's 2020 Annual Business Survey. It provides a very basic look at the level of gender parity in each state.
• Percent Of Employees At Women-Led Firms (15%): This metric compares the number of employees at solely women-led employers firms to the number of employees at solely male-led firms in the state, per data from the Census Bureau's 2020 Annual Business Survey. It provides another sample to estimate gender parity, as well as the economic strength of women-led firms on a state-by-state basis.
• Percent Of Women Who Own A Business (15%): This metric compares the number of women self-employed in their own businesses to the total number of women in the state, per the US Census Bureau's 2021 American Community Survey. It gauges how actively women engage in entrepreneurial roles within each state.
• The Average Income Of Women Business Owners (15%): This is simply the average yearly income, including losses, for self-employed women business owners, per the US Census Bureau's 2021 American Community Survey. It provides a glimpse at the earning potential a woman entrepreneur might have state from state.
• Venture Capital Invested Into Female-Founded & Co-Founded Companies (15%): For this metric, data from PitchBook's US VC Female Founders Dashboard was recorded to calculate the amount of capital invested into venture-backed startups founded or co-founded by women within each state. Data from 2018 through October 2022 were included. Number in millions.
• Percent Of Startups Still Active After One Year (10%): Also known as startup early survival rate, this metric measures the immediate survival of startups and uses data from the 2021 edition of the Kauffman Indicators of Entrepreneurship. Early survival rate doesn't gauge the long-term health of startups, but it gives key insights into the success rate of young startups on a state-by-state basis.
• State Income Tax Rates (7.5%): Each state's highest income tax bracket for 2022 were tallied, with lower tax rates being considered better. States with lower income tax rates can provide entrepreneurs with greater earning potential.
• Unemployment Rates (7.5%): These rates were pulled from the Bureau of Labor Statistic's October 2022 update. For this report, unemployment rates are used as a snapshot to gauge the economic health of each state.

Our data was pulled from six separate sources, including the US Census Bureau's 2020 Annual Business Survey, the US Census Bureau's 2021 American Community Survey, PitchBook's US VC Female Founders Dashboard, the Kauffman Indicators of Entrepreneurship, Tax-Rates.org, and the US Bureau of Labor Statistics.