There has never been a better time to be a woman with the entrepreneurial bug. Businesses owned by women are the fastest-growing sector of new ventures in the United States. Nearly half of all privately held firms in 2004 were at least 50 percent owned by women, according to the National Foundation for Women Business Owners. Between 1997 and 2004, the number of businesses owned by women grew by almost 20 percent, compared with only a 9 percent increase overall.
But are men and women who are trying to build their own businesses playing the same game? According to several recent studies, the deck is often stacked against female entrepreneurs: Compared with men, women tend to start their ventures with fewer resources, less reliable suppliers, and substantially less early-stage venture funding—a critical financial nudge that helps many businesses survive.
Still, there are other avenues to entrepreneurial success, and women seem to be finding them. In a paper recently published in the Journal of Business Venturing, two business school professors, John Becker-Blease, of Washington State University, and Jeffrey Sohl, of the Whittemore School of Business and Economics at the University of New Hampshire, examine how successful women are at getting access to "angel capital," the free-flowing private-equity money that can often make or break a struggling business. In their study, "Do Women-Owned Businesses Have Equal Access to Angel Capital?," the authors use annual survey data from more than 100 angel investing organizations between 2000 and 2004 to compare how businesses owned by men and women fared in their pursuit of investment dollars.
Their findings are surprisingly optimistic: Women do receive less funding than men from angel investors, the authors conclude—but largely because they ask for it much less often. Only 8.9 percent of proposals brought to the angel organizations they studied were pitched by women. As a result, more than 90 percent of angel dollars tend to go to men. When women do pitch to investors, though, they have about the same success rate as men do: In the period studied by the authors, 13.3 percent of female-owned ventures were funded, compared with 14.8 percent of business ideas owned by men. (Neither number is very high, a reminder of the huge hurdles facing anyone trying to start a small business.)
Studies of the banking industry have found that women often have to deal with more subtle forms of discrimination than men do—being charged higher interest rates on loans, for example. But that doesn't seem to be the case in angel investing. "We do not find evidence that women entrepreneurs must surrender greater equity ownership in exchange for investment dollars than men entrepreneurs," the authors write.
In this corner of the small-business world anyway, the playing field does seem to be relatively level. If anything, the study seems to make it clear that women who own small businesses have nothing to fear when it comes to angel funding. The business world may still be rigged against them in some ways, but when it comes to private equity, there doesn't seem to be a ceiling for women, glass or otherwise.