WASHINGTON (PRWEB) March 02, 2018
Access to capital remains one of the greatest barriers for women trying to launch, scale, and grow their businesses. In conjunction with Women’s History Month, March 2018, the National Women’s Business Council has released a report under their Access to Capital pillar titled Understanding the Landscape: Access to Capital for Women Entrepreneurs. The first of four reports released from the Council’s inter-agency agreement with the Federal Research Division of the Library of Congress synthesizes peer-reviewed literature published between 2010 and 2017 to develop a holistic understanding of the literature conducted on women’s entrepreneurship and capital. It also identifies future areas of investigation and gaps in literature for interested researchers. Download the full report and review other research on access to capital at http://www.nwbc.gov.
The key takeaways from the research clearly demonstrate that gender differences are not subject to start-ups only, but continue to be an on-going challenge as women-owned businesses start to scale:
- Compared with men, women business owners raise smaller amounts of capital to finance their firms and are more reliant on personal, rather than external, sources of financing.
- Initial disparities in the levels of startup capital in women-owned businesses as compared with men-owned businesses do not disappear in the years following startup.
- A key difference between men and women regarding bootstrapping (i.e., financing a business without external capital) is that “women choose bootstrapping instead of overdrafts and men choose bootstrap finance to supplement overdrafts.”¹
- Women investors demonstrate a bias toward men business owners, so the gender gap in funding is not likely to narrow simply by having more women become venture capitalists.
- Women in business are often tied to an unconscious association with less credibility and a lack of legitimacy.
The one area in raising capital where women have proven to excel is crowdfunding. Although more men use seed crowdfunding, research shows that women are more successful in this growing funding arena. This most likely stems from women’s unique social network makeup as women have been found to have larger and closer social networks which could benefit them in this funding system.
Women-owned businesses are a crucial and growing part of the U.S. economy, accounting for slightly over one-third of privately-held businesses in the United States, and are making contributions in everything from employment rates to payroll growth.² Yet despite all the evidence that women business owners make significant contributions to the economy, research has shown that men tend to start their businesses with nearly twice as much financial capital than women – $135,000 vs. $75,000. This disparity is substantially larger among firms with high-growth potential – $320,000 vs. $150,000.³ At NWBC we recognize the challenges women business owners face and the research we undertake is focused on illuminating the areas where we can initiate policy recommendations for furthering the growth of women entrepreneurs. As the government’s only independent voice on economic issues impacting women entrepreneurs, access to financial capital remains at the forefront of the NWBC’s agenda.
NWBC is a non-partisan federal advisory council created to serve as an independent source of advice and counsel to the U.S. Small Business Administration, Congress and the White House on issues of impact and importance to women business owners, leaders, and entrepreneurs. To learn more about NWBC, visit http://www.nwbc.gov.
1. Lynn Neeley and Howard Van Auken, “Differences Between Female and Male Entrepreneurs’ Use of Bootstrap Financing,” Journal of Developmental Entrepreneurship 15, no.1 (2010): 31, doi: 10.1142/S1084946710001439.
2. Alicia Robb, Susan Coleman, and Dane Stangler, Sources of Economic Hope: Women’s Entrepreneurship (Kansas City, MO: Ewing Marion Kauffman Foundation, 2014), 3, http://www.kauffman.org/what-we-do/research/2014/11/sources-of-economic-hope-womens-entrepreneurship.
3. Susan Coleman and Alicia Robb, “Access to Capital by High-Growth Women-Owned Businesses,” prepared for the National Women Business Council, 2014.