Women have made meaningful strides when it comes to entrepreneurship during the past 20 years, according to data released from the latest Kauffman Index study of startup activity. However, having access to capital to start and grow businesses continues to be a challenge for female entrepreneurs.
As seen in the recent post, Exploring the State of American Entrepreneurship: A Look at the Stats, women-owned business ownership continues to lag behind male ownership. The same holds true when it comes to funding. When looking at women entrepreneurs then and now, a 20-year perspective on funding shows there is still much to do when it comes to equity.
In March 2018, the National Women’s Business Council, a federal entity, in partnership with the Federal Research Division of the Library of Congress, issued a report analyzing access to capital among women. Here is a closer look at the key findings.
1. Women Raise Smaller Amounts of Capital Than Men
Research shows that women raise smaller amounts of money than men, and rely more on personal funding sources. For example:
- Female company founders are three times less likely to leverage angel investors or venture capital to secure equity financing.
- Women are less likely to tap networks of colleagues and close friends.
- Men and women are equally likely to rely on bank financing.
- Women use decidedly less outside equity than men.
- Women are less likely to be incorporated or apply for new loans.
2. Disparities Present in the Levels of Startup Capital Persist Throughout the Lifecycle of Companies
Over time, the picture continues to be difficult for women. Women are at a disadvantage from the start; 65 percent of women-owned companies had liabilities exceeding assets compared to 57 percent for men at launch.
The revenue gap continues to grow. The study indicates that among companies in operation for seven years, the revenue gap between men and women grew from 32 percent to 42 percent, despite women having higher operating margins.
3. Women Have Fewer Networks, Fewer Resources Than Men
Networks play a critical role in the success of most businesses, but here, again, there are significant gender-based differences.
Research indicates that members of women’s networks often have less managerial and entrepreneurial knowledge. Women generally have less diverse networks, often lacking the number of industry experts in law, accounting, and other disciplines that would be helpful to entrepreneurs.
These differences can often correlate to a lack of access to capital for women.
4. Women Desire More Control, Are More Risk-Averse
Motivation is an important factor, according to research cited in the report. Male entrepreneurs focus more on growth and profits while women seek personal fulfillment, flexibility, and a sense of control.
Women are less likely to seek funding, especially from venture capital, from a desire to retain control and avoid risk, than their male counterparts.
What does the research mean for women seeking more funding? One option is to use Benetrends, which has a proven approach to small business loans for women.
With Benetrends, business owners leverage existing 401(k) and IRA accounts, turning already-available funds into needed cash for launch and expansion. To learn how Benetrends can help you start and grow your small business, download Innovative Funding Strategies For Entrepreneurs.