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Research Reports

High Growth Women-Owned Businesses' Access to Capital

New Research Shows that Women-Owned Firms Exceed Growth Expectations, but Still Lack Access to Capital


In our 2012 annual report, the NWBC stated that getting more money into the hands of women entrepreneurs continues to be a top priority in order to help women start and grow their businesses. Research on this issue is a crucial first step in facilitating this change.  Some researchers attribute women’s lower levels of participation in growth-oriented entrepreneurship to gender differences in key resource inputs, including financial capital. Recent studies indicate that women entrepreneurs raise lower amounts of capital to finance their firms, and are more reliant on personal rather than external sources of financing, than their male counterparts. The report summarized here seeks to explore differences between men and women business owners regarding firm growth, amount and sources of financial capital, and the relationship between the two.  By understanding these issues, we can help promote policies that enable women to fund the start and growth of their businesses.

Key Terms:

  • Firms with high-growth potential are defined as those that have at least five employees by 2011, when the survey ended. While this may seem relatively small, only 6 million out of 25 million businesses have any employees other than the owners themselves. A very small percentage of privately-owned firms have more than five employees.
  • The authors also examined the “Top 25,” i.e. the largest 25 firms for each gender, as measured by employment. The paper examined both the Top 25 women-owned firms as well as the Top 25 men-owned firms, and found interesting differences between them.

Key Findings on Growth:

Women-owned firms exceed their own expectations regarding growth. Women were less likely than men to expect rapid firm growth—defined by number of employees—but were more likely to actually see rapid growth. In general, both women- and men-owned firms were more likely to experience rapid growth from 2008-2011 than their owners expected.

Women-owned firms with high-growth potential exhibited certain features. These firms are more likely to be owned by teams, more likely to be in high-tech industries, more likely to be incorporated, and less likely to be home-based. Additionally, they tend to have owners with higher credit scores and more education. Furthermore, the highest ranked firms in terms of employment were much more likely to have owners with previous startup experience and more years of industry experience.

Gender differences persist even among firms with high-growth potential. Women business owners of high-growth firms were much less likely to have previous startup experience and tended to have fewer years of industry experience than their male counterparts. Despite their high-growth potential, these women-owned firms had fewer employees and were less likely to have intellectual property or be in high-tech fields.

Even among the Top 25 firms, differences exist between men and women. Top-ranked men-owned firms were more likely to have team ownership than their women-owned counterparts. In 2011, 40 percent of Top 25 women-owned firms had only one owner, compared to 15 percent of their men-owned counterparts. And even among this “elite” group, men-owned firms tended to employ more people. The threshold to being a Top 25 firm for women-owned firms was 9 employees, compared to 40 employees for men-owned firms.

Key Findings on Access to Capital:

On average, men start their businesses with nearly twice as much capital as women ($135,000 vs. $75,000). This disparity is slightly larger among firms with high-growth potential ($320,000 vs. $150,000), and much larger in the Top 25 firms ($1.3 million vs. $210,000).

High-growth potential firms started with about twice as much capital as other firms, and were more likely to rely on outsider financing, both debt and equity. However, controlling for other variables including growth potential, men still used significantly higher levels of capital than women from 2005 to 2007.

Other factors that had a positive impact on total financial capital (in some years) include previous startup experience, high credit score, incorporation, team ownership, and number of employees. Being home-based had a negative relationship with total financial capital.

The biggest difference in amount of capital between men and women was with regard to outside equity, even controlling for other factors. Women received only 2 percent of total funding from outside equity, compared to 18 percent for men. This gap also occurred in both the high-growth potential firms and the Top 25 firms. As growth potential increases, so does the dollar amount of external equity used—this is true for both men and women, although the rates of increase differ.

Female ownership was negatively related to the proportion of capital coming from outside debt. Firms that were home-based or had intellectual property used less outside debt proportionately. NWBC posits that being home-based could suggest a lack of collateral.

High credit scores, owner age, incorporation status, number of employees, and high-growth potential were associated with an increase in the proportion of capital coming from outside debt. The high credit score factor is unsurprising; NWBC believes that owner age could reflect a stronger credit history and/or industry experience, and that being incorporated could represent a more organized firm.

Regarding demand for credit (i.e. outside debt), women were more likely to be discouraged from applying for loans due to fear of denial, particularly during the financial crisis of 2008-2010. This fear was somewhat justified: in 2008, women-owned firms were much more likely to have their loan applications denied than their men-owned counterparts.

NWBC’s Key Policy Implications Based on This Research


  • Consider founding your business with other people.  Many investors are reluctant to fund a single business owner because of the difficulty for one person to scale a business.
  • Do a cost-benefit analysis of what equity financing can do for you. Carefully weigh the upside (e.g. financial, social, and human capital) of external equity with the downside, such as less control of the company’s financial and strategic future.


  • Do more outreach to find women entrepreneurs with investment-ready firms.
  • Increase the number of women on the financing and investment side, as angel investors, members of a venture capital pitch committee, and in other roles.

Entrepreneurship Ecosystem:

  • Encourage women’s participation in STEM fields prior to entrepreneurship. Although women are on par with men regarding educational attainment, previous research indicates that women are less likely to have degrees in STEM fields—and these fields are more likely to offer opportunities for growth-oriented entrepreneurship.
  • Establish business programs focused on women and women-led and –owned businesses.
    • Accelerator and incubator programs, equity financing programs, and business mentorship and training programs that target women-owned firms with high-growth potential can help these firms maximize their opportunities for growth.
    • Given the positive relationships between industry experience, startup experience, and total financial capital, programs that allow encourage women to get experience in a particular industry and/or as a business owner could be beneficial.


  • Research why women fear denial of loan applications.
  • Research the reasons why women are denied loans, if there is disproportionate denial relative to men, and the factors contributing to the denial rates if there is a differential. Banks may need to educate women entrepreneurs about the consequences of application denial and how to reapply.

Note on possible survival bias: Due to the fact that firms that closed are not included in data for subsequent years, it is impossible to control for potential survival bias and the possibility that samples from later years contain firms that have specific attributes that allowed them to stay in business. However, it is important to note that the data used for this research, from the Kauffman Firm Survey (KFS), is well-regarded among academics and researchers. This issue is in no way unique to the KFS, and the potential for survival bias exists within most firm-level data, as data is not collected on firms that do not exist. 

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