Female entrepreneurs are far less likely than their male counterparts to seek angel financing even though the percentage of women owned businesses securing funding is not that much lower than the success rate of businesses owned by men, new research shows.

Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire, and John Becker-Blease, a former UNH professor who now teaches at Washington State University, report that 14.79 percent of male-owned businesses that seek angel funding receive it. Female-owned businesses succeed at a 13.33 percent rate.
However, only 8.9 percent of female entrepreneurs seek funding, and of those most seek support from female angels, the researchers said.
“These results provide important support for the public policy suggestions that one means of improving the efficiency with which new venture funding is allocated to entrepreneurs is to increase the participation of women investors in early-stage financing markets,” the researchers wrote. “

If women-owned businesses are more likely to submit proposals to women angels, then increasing the supply of women angels will encourage greater flow of women-owned business deals to investors, and thus greater participation of women entrepreneurs in the high-growth, high-return industries typically financed by private equity,” they added.

Despite the lack of angel funding support, female-owned businesses are the fastest growing sector in receiving new venture funding overall, according to the Center for Venture Research.

Dilution of ownership also is similar at funded businesses regardless of the owners’ gender, the research showed.

“Our evidence suggests that women-owned businesses and male-owned businesses must surrender relatively similar amounts of equity in return for investment,” the authors said. “However, more detailed deal-level data could allow this question to be examined more thoroughly and also provide insights into whether and how proposals from women-owned businesses and male-owned businesses differ.”

The center has been conducting venture research since 1980, but Sohl and Becker-Blease conceded that they do not have answers to all the questions about the female-owned business financing issue.

“Why so few women investors appear to participate in the angel market could be because there are very few women investors with the necessary expertise and experience to be effective providers of angel capital,” they said. “Alternatively, women angels may perceive or experience barriers to quality investment opportunities compared to men angels and thus elect to participate in the market at a substantially lower rate than do men angels.

“Finally, women angels may participate more actively than our data suggest, but elect to do so outside of organized angel groups,” they added.