Women Entrepreneurs Choose a Different Path

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Traditionally, women-owned businesses were primarily in the retail and service sectors, but more and more women are moving into the world of technology. Still, the old problems of slower growth and lower revenues persist.

A new study by the Kauffman Foundation found that women launch high-technology firms with less external capital than men. The study, "Sources of Financing for New Technology Firms: A Comparison by Gender," collected information from nearly 5,000 firms.

The report found fundamental differences between high-tech firms owned by women versus ones owned by men. Women-owned firms generated less revenue and profits, employed fewer people, and were more likely to be home-based than male-owned firms. In addition, women-owned firms were less likely to have employees or intellectual property assets than their male counterparts and were growing at a slower rate. The report's authors looked for reasons to explain this trend.

One insight lies in the amount and sources of the firm's startup capital. Women-owned businesses launched with about 70 percent of the capital compared to ones owned by men. These numbers are reflected in the first-year reports on revenues and profits. Businesses owned by men more than doubled those owned by women in both areas. Most of the gaps that emerged in the firms' startup year never narrowed.

With less capital, women entrepreneurs may be more constrained in their ability to launch new products, expand, and hire new employees--all of which would contribute to slower growth as well as lower revenues and profits. While some of the news may be discouraging, the number of businesses owned by women is on the rise.

"In the last couple decades, women have really diversified and more are entering into these emerging lines of business. So the fact that we have a lot of women in the high-tech industry is pretty exciting," says Alicia Robb, one of the report's authors.

As for sources of capital, women used more personal equity while men were more likely to rely on outside equity. …

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