The latest sketchbook video from the Kauffman Foundation examines the way in which women are facing greater challenges than men in getting financing for their companies, which is one of the reasons why this untapped population is not scaling businesses. It examines some of the underlying causes for those challenges.
According to the narrator, Alicia Robb (who is also one of the authors of A Rising Tide, a new book that delves into the topic of financing strategies of women-owned firms), "You hear a lot about the number of women-owned businesses growing faster than firms overall, but that's really just a reflection of the lower base. "If you look at revenues or employment or payroll, [women-owned firms] are not growing faster than male-owned businesses; they are actually growing slower."
This reflects the findings of a paper I recently co-authored on the subject of financing for female entrepreneurship. "Differences in perceptions of access to finance between potential male and female entrepreneurs: Evidence from the UK", published in International Journal of Entrepreneurial Behaviour and Research(Vol 18, No 1) examined whether being female increases the probability that an individual feels difficulty in obtaining finance is a barrier to starting a business.
Although the actual financial barriers faced by female entrepreneurs have been extensively studied, this is one of the first studies to focus on the concept of perceived financial constraints faced by potential female entrepreneurs. The results suggest that a greater proportion of women are solely constrained by financial barriers than their male counterparts. The gender of the respondent was also found to interact with a number of other personal characteristics in a significant manner. In terms of practical implications, this finding suggests that policymakers should be encouraged to market the availability of start-up finance from various sources to encourage women to attempt to obtain the necessary finance rather than being discouraged at the first hurdle.