According to a collection of stats compiled by the Small Business Administration, women use less capital to start their businesses than men do. In a number of studies, fewer female entrepreneurs indicated that they required funding, and those who did seek funding tended to use less of it.
They Do Without
Over a third more women indicate they do not need startup funding at all:
- Women who do not need financing: 30.3%
- Men who do not need financing: 19.5%
They Use Less Capital
For those who require capital to start their businesses, how much money do they really need? This number can vary widely depending on the business type, but the amount also appears to be stratified amongst men and women. When asked if they started their businesses with…
Less than $25,000 in funding:
- Women: 62%
- Men: 56%
More than $125,000 in funding:
- Women: 17%
- Men: 22%
It seems that while entrepreneurs have vastly different funding needs, more women made do with $25,000 in initial capital, while slightly more men started businesses with more than $125,000.
They Use Less of Most Sources
Entrepreneurs acquire capital from a variety of sources, including family, savings, loans and investors. Women seemed to accept less capital from most of these sources:
- Women: 55.5%
- Men: 62.1%
- Women: 5.5%
- Men: 11.4%
Home equity loan:
- Women: 4%
- Men: 5.1%
- Women: 0.1%
- Men: 0.4%
There was one source of capital that women used about 1% more than men, and that was funding from a personal or business credit card.
Second Round of Funding
While women may work with less funding during a business launch, are they equally as thrifty once operations begin? Another study showed that even after they’d launched, women are less likely than men to take on additional debt to expand their businesses.
So what does this all mean? Why is there such a striking gender gap in startup capital? Do women spend less because they are more likely to start businesses in industries that require less capital (i.e. a jewelry business versus a financial investment firm)? Or are they really doing more with less?
More importantly, just because a business was launched with less startup capital doesn’t mean that it will be more successful. Are women entrepreneurs being more risk-averse to their detriment, or simply being frugal? What do you think?