A Rising Tide: Financing Strategies for
Women-Owned Firms
Alicia Robb, Senior Research Fellow
Kauffman Foundation
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
“Every individual that we can
inspire, that we can guide, that we
can help to start a new company,
is vital to the future of our
economic welfare.”
— Ewing Kauffman
A Rising Tide……
Co-authored with Susan Coleman and published by Stanford
University Press
One of our goals of our book was to tie together the
research findings on financing women-owned firms with the
real-world stories of a sampling of women entrepreneurs.
We said to ourselves, “OK, this is what the data say, but how
does it really work in practice?”
We used a framework of entrepreneurship theory and
research, drawing on Resource-based Theory, Motivational
Theory, and Life Cycle Theory.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Quick Look at Entrepreneurship Theory
Resource-based Theory contends that the resources an
entrepreneur has access to in the form of financial, human,
and social capital will shape the type of firm that she starts
as well as the subsequent performance of that firm.
Motivational Theory suggests that entrepreneurs have
different motivations for launching their firms. These, in turn,
will help to determine a number of factors such as industry
selection, size, growth rate, and financial strategy.
Life Cycle Theory states that firms at different stages of
development have different characteristics. Thus, the
financing strategies of a new or nascent firm may be very
different from those of an established firm or a firm going
through a period of rapid growth.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
One Size Does Not Fit All…..
The theme of “one size does not fit all” also serves as an
underpinning for A Rising Tide: Financing Strategies for
Women-Owned Firms.
The book chapters illustrate many of the different types of
entrepreneurial firms including nascent, home-based, familyowned, growth-oriented, technology-based, minority-owned,
and global firms.
Each chapter presents different types of entrepreneurs and
different financing strategies.
In spite of these differences, however, common themes
emerged regarding the importance of developing sources of
financial, human, and social capital.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Blending Theory and Practice
Sections on What Have We Learned? and What Does this
Mean for Me? tie the content of the chapter to the needs and
interests of our readers.
We also explore issues and questions of public policy,
particularly those policies that encourage entrepreneurship
among women and facilitate the processes of
entrepreneurship.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Overview of Women’s Entrepreneurship
Number of Firms in the United States
Firms
1997
2002
2007
Women
5,417,034
6,489,483
7,793,425
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
All
20,821,934
22,974,685
27,110,362
Women's
Share
26.0%
28.2%
28.7%
Business Receipts (Census Data)
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Women-Owned Employer Firms Contribution to
Firms, Receipts, Employment, and Payroll (2007)
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Key Takeaways and Lessons Learned
Several common themes have emerged from our research and
interviews with “real life” women entrepreneurs.
“Doing something I love…..”
They are doing something that they love and have a passion
for and have found ways to be successful by carving out
their own path.
Further, they have defined success in their own terms, not
necessarily in Wall Street’s terms or in the terms of their
male counterparts.
Often their success is measured by personal satisfaction,
independence, and balance rather than in solely financial
and economic terms.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
“It takes a village…”--- Establishing networks
A growing number of women in the ranks of senior
management is allowing women to accumulate the human,
social, and financial capital that will equip them for
entrepreneurship or, alternatively, for investment in
entrepreneurial firms.
These gains are helping women acquire skills and
experience in the areas of leadership and financial
management while also providing access to networks that
can lead to the acquisition of other resources including
financial resources.
Equally important, networks provide women entrepreneurs
with sources of support, role models, and confidence, all of
which help in crafting financial strategies or seeking out and
negotiating with providers of capital.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Risk Taking—calculated risks, not stupid risks
Any time you start a new firm, there is an element of risk,
and prior research suggests that women are less willing to
take risks than men.
We did not find this to be the case in our interviews with
successful women entrepreneurs.
– Several launched firms as single parents with dependent
children and limited financial resources.
– Others left lucrative and successful careers to strike out
on their own.
– Some took really big risks by staking their homes and
personal livelihoods on their firms.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
“To thine own self be true”
Another thing that impressed us about our
entrepreneurs was that they had a very clear
understanding of their priorities and goals.
Each of our entrepreneurs was able to clearly and
succinctly articulate what was most important to
her.
Their firms, in turn, were a reflection of those
priorities and values.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
“Try, try, and try again….”
Persistence in crafting financial strategies and seeking
sources of financing.
We could say “the buck starts here” for this set of
entrepreneurs. In different ways, several of them said
essentially the same thing; that your firm’s destiny rests
in your own hands, and you have to take responsibility
for making things happen.
In the realm of finance, this means that investors will
not fund you just because you have a good idea. You
have to be doggedly persistent in selling your idea to
potential investors, following up, and negotiating for
your own best deal.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
An Inventory of Financial Strategies
Develop your own level of financial literacy and skills.
Identify your goals and align your financial strategies
with your goals.
Cash is king. Or queen, as the case may be.
Companies do not go out of business because they
don’t have good ideas, customers, or revenues. They
go out of business because they run out of cash.
Manage your working capital accounts-- cash, accounts
receivable, and inventory-- Entrepreneurs are often so
busy running their business that they forget to manage
these three critically important accounts.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
An Inventory of Financial Strategies
Don’t be afraid to try something new. Most of our
entrepreneurs were innovators in one way or another,
and innovation is a way to generate additional revenues
by introducing new products, entering new markets, or
taking advantage of new technologies
If you have a problem, confront it promptly, deal with it,
and move on.
Identify the individuals, networks, and organizations that
can help you gain access to needed resources in the
form of human, social, and financial capital.
Be on the lookout for funding and support services
targeted at particular types of firms, industries, or
geographic regions.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
An Inventory of Financial Strategies
Be confident (yes, this is a financial strategy).
– Prior research reveals that women are less likely to apply
for loans, because they assume they will be turned down.
This is true, although there is no significant difference
between loan approval rates for women and men.
– In the area of equity funding, prior research reveals that
women may not ask for enough capital to adequately fund
their firms.
– Women also feel less confident of their ability to negotiate
with equity investors, and less confident in their level of
financial skills overall.
Last, but not least, pay it forward. If more women help other
women, then more women will succeed.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Public Policy Priorities
Encourage and equip the next generation of women
entrepreneurs to enter industries that have significant
opportunities for growth and wealth accumulation. These
include growth-oriented fields such as math, science,
engineering, computer science, health care, and bioscience.
Develop a higher level of financial literacy among our
citizens.
Develop policies and practices that recognize the role of
entrepreneurship in general and women’s entrepreneurship
in particular at the local, state, and national levels.
Ensure that financial capital is available and affordable to
small and entrepreneurial firms.
Build a better balance between women and men at the more
senior levels of angel investor networks and VC firms.
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
What’s next for us?
How do we get more high growth women’s
entrepreneurship?
Qualities typically associated with innovation and high
growth entrepreneurship include:
– self confidence
– willingness to assume risks that may accompany failure.
Prior research attests to gender differences in both of these
dimensions, which has implications for the level of
involvement of women in high growth entrepreneurship and
innovative activities.
Focus of next book will be on how to increase women’s
participation in high growth women’s entrepreneurship, high
tech industries, and equity financing (supply and demand!)
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.
Questions? Comments?
[email protected]
[email protected]
www.kauffman.org
© 2007 by the Ewing Marion Kauffman Foundation. All rights reserved.