Women-owned Startups Underperform Men-owned Firms

Women-owned firms are underperforming men-owned firms, according to a research report prepared by The Ewing Marion Kauffman Foundation, the world's largest foundation devoted to entrepreneurship.

Women-owned firms made impressive gains from 1997 to 2002, growing by 19.8 percent, compared with a 10.3 percent growth rate in U.S. firms overall. But the women-owned firms also recorded lower survival numbers, as well as lower numbers for size, growth, earnings and profits. The data suggest that women-owned firms are smaller and less growth-oriented than men-owned firms.

The newest research paper, Characteristics of New Firms: A Comparison by Gender, is third in a series of Kauffman Firm Survey (KFS) studies. The KFS surveyed nearly 5,000 businesses founded in 2004 and tracks them annually over their early years of operation.

The study revealed that women-owned firms tended to start with less capital. Nearly 62 percent of women started their firms with less than $25,000, compared with 55.9 percent of men. In addition, a higher percentage of women had low credit scores (38.1 percent) compared with men (31.6 percent), which could have implications for women owners' ability to secure financing for their firms.

Additional key findings:

• On average, both women and men firm owners were 44 years old, but men had more years of prior industry experience and devoted more time to the business.
   
• Women were more likely to operate home-based businesses and were more likely to be organized as sole proprietorships, whereas men-owned firms tended to be LLCs or corporations.
   
• On average, men-owned firms had assets of $104,313, compared with $57,338 for women-owned firms.

A follow-up to the KFS study, which will examine the first four years of these young firms, will be available in spring 2009.