A Rising Tide: Financing Strategies for Women-Owned Firms

1. A Rising Tide: Financing Strategies for Women-Owned Firms “Every individual that we can inspire, that we can guide, that we can help to start a new company, is vital to the future of our economic welfare.” — Ewing Kauffman Alicia Robb, Senior Research Fellow Kauffman Foundation

2. A Rising Tide…… • Co-authored with Susan Coleman and published by Stanford University Press • One of our goals of our book was to tie together the research findings on financing women-owned firms with the real-world stories of a sampling of women entrepreneurs. • We said to ourselves, “OK, this is what the data say, but how does it really work in practice?” • We used a framework of entrepreneurship theory and research, drawing on Resource-based Theory, Motivational Theory, and Life Cycle Theory.

4. Quick Look at Entrepreneurship Theory • Resource-based Theory contends that the resources an entrepreneur has access to in the form of financial, human, and social capital will shape the type of firm that she starts as well as the subsequent performance of that firm. • Motivational Theory suggests that entrepreneurs have different motivations for launching their firms. These, in turn, will help to determine a number of factors such as industry selection, size, growth rate, and financial strategy. • Life Cycle Theory states that firms at different stages of development have different characteristics. Thus, the financing strategies of a new or nascent firm may be very different from those of an established firm or a firm going through a period of rapid growth.

5. One Size Does Not Fit All….. • The theme of “one size does not fit all” also serves as an underpinning for A Rising Tide: Financing Strategies for Women-Owned Firms. • The book chapters illustrate many of the different types of entrepreneurial firms including nascent, home-based, family-owned, growth-oriented, technology-based, minority-owned, and global firms. • Each chapter presents different types of entrepreneurs and different financing strategies. • In spite of these differences, however, common themes emerged regarding the importance of developing sources of financial, human, and social capital.

6. Blending Theory and Practice • Sections on What Have We Learned? and What Does this Mean for Me? tie the content of the chapter to the needs and interests of our readers. • We also explore issues and questions of public policy, particularly those policies that encourage entrepreneurship among women and facilitate the processes of entrepreneurship.

7. Overview of Women’s Entrepreneurship Number of Firms in the United States

8. Business Receipts (Census Data)

10. Women-Owned Employer Firms Contribution to Firms, Receipts, Employment, and Payroll (2007)

11. Key Takeaways and Lessons Learned Several common themes have emerged from our research and interviews with “real life” women entrepreneurs. “Doing something I love…..” • They are doing something that they love and have a passion for and have found ways to be successful by carving out their own path. • Further, they have defined success in their own terms, not necessarily in Wall Street’s terms or in the terms of their male counterparts. • Often their success is measured by personal satisfaction, independence, and balance rather than in solely financial and economic terms.

12. “It takes a village…”--- Establishing networks • A growing number of women in the ranks of senior management is allowing women to accumulate the human, social, and financial capital that will equip them for entrepreneurship or, alternatively, for investment in entrepreneurial firms. • These gains are helping women acquire skills and experience in the areas of leadership and financial management while also providing access to networks that can lead to the acquisition of other resources including financial resources. • Equally important, networks provide women entrepreneurs with sources of support, role models, and confidence, all of which help in crafting financial strategies or seeking out and negotiating with providers of capital.

13. Risk Taking—calculated risks, not stupid risks • Any time you start a new firm, there is an element of risk, and prior research suggests that women are less willing to take risks than men. • We did not find this to be the case in our interviews with successful women entrepreneurs. • Several launched firms as single parents with dependent children and limited financial resources. • Others left lucrative and successful careers to strike out on their own. • Some took really big risks by staking their homes and personal livelihoods on their firms.

14. “To thine own self be true” • Another thing that impressed us about our entrepreneurs was that they had a very clear understanding of their priorities and goals. • Each of our entrepreneurs was able to clearly and succinctly articulate what was most important to her. • Their firms, in turn, were a reflection of those priorities and values.

15. “Try, try, and try again….” • Persistence in crafting financial strategies and seeking sources of financing. • We could say “the buck starts here” for this set of entrepreneurs. In different ways, several of them said essentially the same thing; that your firm’s destiny rests in your own hands, and you have to take responsibility for making things happen. • In the realm of finance, this means that investors will not fund you just because you have a good idea. You have to be doggedly persistent in selling your idea to potential investors, following up, and negotiating for your own best deal.

16. An Inventory of Financial Strategies • Develop your own level of financial literacy and skills. • Identify your goals and align your financial strategies with your goals. • Cash is king. Or queen, as the case may be. Companies do not go out of business because they don’t have good ideas, customers, or revenues. They go out of business because they run out of cash. • Manage your working capital accounts-- cash, accounts receivable, and inventory-- Entrepreneurs are often so busy running their business that they forget to manage these three critically important accounts.

17. An Inventory of Financial Strategies • Don’t be afraid to try something new. Most of our entrepreneurs were innovators in one way or another, and innovation is a way to generate additional revenues by introducing new products, entering new markets, or taking advantage of new technologies • If you have a problem, confront it promptly, deal with it, and move on. • Identify the individuals, networks, and organizations that can help you gain access to needed resources in the form of human, social, and financial capital. • Be on the lookout for funding and support services targeted at particular types of firms, industries, or geographic regions.

18. An Inventory of Financial Strategies • Be confident (yes, this is a financial strategy). • Prior research reveals that women are less likely to apply for loans, because they assume they will be turned down. This is true, although there is no significant difference between loan approval rates for women and men. • In the area of equity funding, prior research reveals that women may not ask for enough capital to adequately fund their firms. • Women also feel less confident of their ability to negotiate with equity investors, and less confident in their level of financial skills overall. • Last, but not least, pay it forward. If more women help other women, then more women will succeed.

19. Public Policy Priorities • Encourage and equip the next generation of women entrepreneurs to enter industries that have significant opportunities for growth and wealth accumulation. These include growth-oriented fields such as math, science, engineering, computer science, health care, and bioscience. • Develop a higher level of financial literacy among our citizens. • Develop policies and practices that recognize the role of entrepreneurship in general and women’s entrepreneurship in particular at the local, state, and national levels. • Ensure that financial capital is available and affordable to small and entrepreneurial firms. • Build a better balance between women and men at the more senior levels of angel investor networks and VC firms.

20. What’s next for us? • How do we get more high growth women’s entrepreneurship? • Qualities typically associated with innovation and high growth entrepreneurship include: • self confidence • willingness to assume risks that may accompany failure. • Prior research attests to gender differences in both of these dimensions, which has implications for the level of involvement of women in high growth entrepreneurship and innovative activities. • Focus of next book will be on how to increase women’s participation in high growth women’s entrepreneurship, high tech industries, and equity financing (supply and demand!)

21. Questions? Comments? • arobb@kauffman.org • scoleman@hartford.edu • www.kauffman.org