Sources of Financing for New Technology Firms: A Comparison by Gender

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. This paper was compiled using data from the Kauffman Firm Survey (KFS), and authored by Alicia Robb of the Kauffman Foundation and Susan Coleman of the University of Hartford.

Key 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.