Economic Woman

Econometrics, gender, equity and more.

The capital gap

with 3 comments

This blows my mind. It’s from the Interesting Statistics page over at Women Don’t Ask, which I posted about a few days ago.

Women own about 40 percent of all businesses in the U.S. but receive only 2.3 percent of the available equity capital needed for growth. Male-owned companies receive the other 97.7. percent.

I would guess that a small number of male-owned companies get the vast majority of that capital. I’ll probably do some more reading and make a longer post about what is behind this, but in the meantime I’d love to hear your theories in comments.


Written by Allison

19 May 2008 at 12:22 pm

Posted in Uncategorized

3 Responses

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  1. The first thing I would want to know is how public companies…indeed, all companies other than sole proprietorships and such…are treated in these statistics.

    david foster

    19 May 2008 at 12:29 pm

  2. The statistics come from “Women Entrepreneurs in the Equity Capital Markets: The New Frontier” however I think it’s unduly simplifying it.

    First of all its 2.3% of equity capital from from “Institutional investors”, not 2.3% of all equity capital As the report states “Currently, equity capital for women-owned businesses is most likely to come from informal or individual investors, not from institutional equity investors.”

    In addition, the website makes a leap that because 2.3% of equity captial [sic, for the reasons listed above] goes to women owned businesses owned businesses, 97.7% go to male owned businesses. That it a faulty assumption. I’m not saying that intersexuals own a large chunk of the American economy. But the kind of businesses that institutional investors are most likely to invest in are large companies. In most of these cases the company per se is not owned by a man or a woman, it is owned by those who hold equity in it and is thus counted as neither male or female owned.

    Jacob K.

    19 May 2008 at 5:51 pm

  3. I’m also thinking in terms of company size. I’m guessing that a large number of women-owned businesses are 1-2 person, work-from-home arrangements set up by women who wanted more flexibility when they had children. I’m guessing that many fewer male-owned businesses are in this category. I can’t imagine such a business routinely requiring or seeking large amounts of capital.

    So I’d want to see some more controls. Do we keep seeing this phenomenon once we control for size and type of business? (I’m going to guess we do, but with less dramatically lopsided numbers.) What even counts as a business? (I tutor kids — yup, a one-person, family-friendly sideline — and I’ll be filing a Schedule C for that next year, but I don’t have any formal paperwork establishing myself as a company. And I certainly don’t need any capital.) The statistic as given on the Women Don’t Ask page is totally decontextualized, so I can’t tell if the obvious controls have been applied.


    23 May 2008 at 9:32 am

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