Authors

• Alicia Robb (Kauffman)
• Susan Coleman (University of Hartford)

Overview

In this short report, data was used from the Kauffman Firm Survey to examine the financing sources and strategies, by gender, of high-tech firms. The findings reveal that women entrepreneurs raised significantly smaller amounts of financial capital at startup than men did. When controlled for a variety of firm and owner characteristics, however, there were no significant differences between women and men in terms of total capital raised at startup. Nevertheless, even controlling for other variables, women high-tech entrepreneurs were significantly less likely to use external equity.

Women entrepreneurs launch high-technology firms with less financial capital than men, and continue to follow a different financial strategy over time. Women's reliance on internal funding sources makes a difference: Years after startup, women-owned high-tech firms continue to lag behind men-owned firms in numerous performance measures, including revenues, profits, assets and employment.

Data

• 2004 - 2007 data

Analysis

• Multivariate analysis, dprobit models

Independent Variables

• Gender

Dependent Variables

• Model one: outside debt
• Model two: bank loans

Findings

• Women-owned high-tech firms were more likely to be organized as sole proprietorships or partnerships than as corporations or limited liability corporations. They also were more likely to be home-based businesses and less likely to have employees. This suggests that, even at startup, men anticipated developing larger and more complex firms than women.
• Over that same period of time, the women-owned high-tech firms continued to lag behind the men-owned firms in critical performance measures. For example, on average, women-owned firms had four employees in their fourth year of operation compared with nearly seven employees at men-owned firms.
• From startup through the fourth year of operation, the women-owned high-tech firms did make progress in raising substantial amounts of capital and in developing intellectual property.
• The women entrepreneurs remained unwilling or unable to develop external sources of equity capital over their first four years of operation, which could fund further innovations, employment or growth.
• Women in high-tech firms invested substantially higher levels of financial capital in their businesses than women not in high-tech industries, at startup and over time.

These findings suggest that, over time, women owned high-tech firms were able to make progress in terms of developing intellectual property, which can be an advantage competitively and in raising substantial amounts of capital to sustain their firms. Nevertheless, women-owned firms continued to lag men-owned firms in performance measures such as revenues, profits, assets, and employment, and they remained unwilling or unable to develop external sources of equity capital that could be used to fund further innovations, employment, or growth.