Contact: Rossana Weitekamp, 516-792-1462,
rossana@weitekamp.com Barbara Pruitt, Kauffman Foundation, 816-932-1288,
bpruitt@kauffman.orgKauffman Foundation research shows women use less external equity, lag behind men-owned firms in numerous performance measures over time
(KANSAS CITY, Mo.) July 7, 2009 – Women entrepreneurs launch high-technology firms with less financial capital than men, and continue to follow a different financial strategy over time. According to a report released today by the Ewing Marion Kauffman Foundation, 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.
The research paper,
Sources of Financing for New Technology Firms: A Comparison by Gender, is fifth in a series of Kauffman Firm Survey (KFS) studies. The KFS collected information on nearly 5,000 firms that started in 2004 and surveys them annually. The KFS is the first longitudinal survey of its kind, focusing on the nature of new business formation activity and characteristics of the firms and owners.
"The Kauffman Firm Survey provides us with tremendous insights into high-tech startups in America, and their different financing strategies," said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation. "It's especially important now, given the recent credit crisis and the critical role that entrepreneurs, including those in technology, play in the economic recovery."
The report reveals that women high-tech entrepreneurs raised significantly smaller amounts of financial capital at startup than men. However, when researchers controlled for a variety of firm and owner characteristics, there were no significant differences between women and men in terms of total capital raised at startup.
"What we discovered was that women high-tech entrepreneurs were much less likely to use external equity," said Alicia Robb, Kauffman Foundation senior research fellow and one of the paper's authors. "They may have relied on internal funding because they didn't want to share control of the firm, or because they didn't have equal access to external funding networks."
In addition, Robb said the women entrepreneurs may not have had the personal capital for seed funding needed to attract larger amounts of external equity.
"Whatever the reason, the fact that women raised dramatically lower amounts of external equity capital at startup has implications for their ability to introduce new products and services, expand into new territories, and hire employees," Robb said.
The study also found that:
- 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.
The entire KFS dataset is accessible to scholars worldwide, and all reports in the KFS series are available for download. The public-use microdata file and reports are available at
http://www.kauffman.org/research-and-policy/kauffman-firm-survey.aspx.
