Monday, August 6, 2012

From Science to Business: Preparing Female Scientists and Engineers for Successful Transitions into Entrepreneurship: Summary of a Workshop

The opening workshop address was designed to provide an overview of women’s status and participation in entrepreneurial careers. E. J. Reedy presented findings from a Kauffman Foundation study titled “Sources of Financing for New Technology Firms: A Comparison by Gender” (2009) and noted that a relatively small
number of studies have specifically examined the experience of women in high-tech entrepreneurship.2 The Kauffman Foundation study shows that among all surveyed startup firms, only 15 percent of those in the biotechnology and hightechnology sectors reported having a female primary owner as compared to 30 percent femaleowned startup firms in all other sectors. In the initial start-up year, among the high-tech start-ups examined, 20 percent of male-owned firms reported obtaining formal equity (primarily venture capital or angel funding), compared to 7 percent of female-owned firms. Reddy suggested that this occurs because the venture capital industry is relatively closed and male-dominated. His studies show that women-owned firms represent a small minority of the overall venture capital backed firms, which may contribute to the lack of initial formal equity. 

He noted that an additional factor may be that female owners of high-technology firms have less overall
managerial experience than their male counterparts and are less likely to have previously owned
start-up companies in the same field, since 55 percent of male owners have previously owned a
high-technology start-up compared to 12 percent of females. Reedy pointed out that venture
capitalists view this serial behavior—and even serial failure—as a mark of an entrepreneur being
tested, because investors value an entrepreneur’s willingness to start over again and again.
Reedy further elaborated on the gender gap in the high-tech industry by quoting similar
findings by other researchers. A 2006 study by Cross and Linehan found that in established
high-tech organizations, women are often excluded from formal and informal networks that
would otherwise provide access to managerial or technical leadership positions in those firms.3
Similarly, a 2005 study by Tai and Randi L. Sims4 found that women had difficulty gaining
senior management experience that would make them attractive to external capital providers,
should they start their own companies. Reedy considered the pervasive culture in such
enterprises as a plausible reason for this gap, where issues such as work-life balance and familyfriendly
policies affect gender equity.

Despite the existing gaps, Reddy noted that women-owned firms represent a growing
component of the small-business sector. According to a U.S. Census Bureau report,5 there were
6.5 million privately held women-owned firms in the United States in 2002. These firms
generated an estimated $940 billion in sales and employed 7.1 million people. He continued to
comment that women-owned firms now account for 30 percent of all firms, including selfemployment
and larger businesses. From 1997 to 2002, the number of women-owned businesses
increased 20 percent. However, he noted that revenues from women-owned businesses increased
less than 15 percent during this period, compared to a 22 percent revenue increase for all
businesses.

A study on women-owned high-tech firms in four metropolitan regions in the United
States—Silicon Valley, Boston, Washington, D.C., and Portland, Oregon— found that in all four
regions women-owned high-tech firms were smaller in terms of average revenue and
employment.6 Reddy suggested that women are more likely to form companies alone than in
partnership with men, even though studies indicate that the success rate for new companies
increases as the number of company founders increases. Women entrepreneurs are also more
likely to participate in high-tech sectors such as software publishing, computer systems design
services, research services, and management and consulting services; whereas men are more
likely to establish companies in the manufacturing sector. Interestingly, Reddy noted both maleand
female-owned start-ups were initially shown to be based out of the home, 50 percent of the
time for males and 60 percent of the time for females, suggesting a focus on consulting efforts.
Female-owned high-tech start-ups do show a slightly higher survival rate than those
owned by men. However, Reedy noted that women entrepreneurs launch high-technology firms
with less financial capital than men, and continue to follow a different financial strategy over time. Women’s reliance on internal funding sources (e.g., owners’ savings, loans from family
and friends, credit cards) makes a difference such that years after startup, women-owned hightech
firms lag behind men-owned firms in numerous performance measures, including revenues,
assets, and employment. However, profits were shown to be higher for female-owned firms.
In addition, Reedy discussed the age at which entrepreneurs usually start their businesses.
One of the common misconceptions about entrepreneurs is that these individuals are age 25 to
30.7 In fact, it is more common for those in their late 30s and early 40s to start companies
because at that age people have considerable industry experience and starting a business is a
strategic part of their overall career goals. This average start-up owner age was not shown to
vary significantly between men and women or across sectors. But women owners reported
working slightly fewer hours per week than their male counterparts.

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