Amy Millman

(WOMENSENEWS)–It almost goes without saying that as entrepreneurs dig into their own pockets to start a business, they are taking a risk.

And by now it is widely known that many entrepreneurs are female. As of 2004, women controlled 50-percent or more of an estimated 10.6 million privately-held firms, and the total of these female-controlled firms account for nearly half of all privately held firms in the country, according to the Center for Women’s Business Research in Washington, D.C.

But advocates for businesswomen say that women trying to start their own companies can nonetheless be disadvantaged by the perception that they are more risk-averse than men when it comes to business and finance.

“Venture capital and private equity firms often need to be reminded that female entrepreneurs are taking risks and doing so with a high probability of success,” said Sheryle Bolton, chair of the Forum for Women Entrepreneurs and Executives, based in San Francisco, and president of her own business strategy consulting company, The Indian Creek Group, which she founded in the Oakland in 2002. “The conventional wisdom is that women are not willing to take risk and don’t have the business background to do it successfully.”

Women’s perceived unwillingness to take risk can be traced to a variety of published research on the attitudes of different cohorts of women–none of them female entrepreneurs– toward risk.

In 2001, for instance, Leader’s Edge, a Philadelphia-based organization dedicated to enhancing executive women’s effectiveness, studied senior executive women at Fortune 500 companies and found them less assertive, more formal, and more risk-averse than their male counterparts and more-junior executives.

An Internet search, meanwhile, produces myriad studies and articles published by scholarly journals, economic institutions and banks that document differences between male and female attitudes toward risk. Particularly attention-getting seems to be a 1998 study by Colorado State University professors Nancy Ammon Jianakoplos and Alexandra Bernasek, published in the journal Economic Inquiry. The authors found that single women exhibit relatively more risk aversion in financial decision making than single men.

Last summer, however, the Center for Women’s Business Research, took a fresh swipe at the topic by publishing its own study which, for the first time, focused on female business owners. This seemed to produce a startling different set of findings.

“Worth the Risk: Women Business Owners and Growth Capital,” found that 66 percent of female business owners are willing to take above-average or substantial financial risks when saving or investing for their business.

And that, said Amy Millman, an advisor to entrepreneurs in Washington, D.C., is exactly the kind of information that investors need to see. Because investors are looking for enterprises with growth potential and that is alloyed to an entrepreneur’s ability to assume risk.

Countering a Myth

“Women are natural risk takers,” said Millman, “and the findings are important to counter the myth that women are risk averse. It is especially important to get this kind of information in front of investors, like venture capitalists or investment bankers, who would be looking to fund business, but want to fund those businesses that will have growth potential.”

Venture capitalist Amal Johnson, a general partner in ComVentures, a Palo Alto, Calif-based venture capital firm, says she does not even consider the propensity for risk-taking when looking at investments.

“We never assess whether a man or women is a risk-taker,” Johnson said. “We make our decisions based on the technology; whether it is unique or different, whether a product has the potential to change a market and how large a market it can create. Then we look at the market itself.”

Margaret H. Wyant, managing director of Cincinnati-based Isabella Capital LLC, whose Fund Isabella focuses on early stage companies that are often female-led, agrees that risk-taking is not a quality by which proposals and applicants are considered.

Nonetheless, Wyant said the information in the “Worth the Risk” study is still good to get out there. “Faster growth does involve risk. The study is important because there is a common misperception that women business owners are risk averse.”

Faster Growth, Greater Risk

The study compared women who currently are seeking, preparing to seek or have sought growth capital with those who never have sought growth capital. It found that women who want to substantially expand their businesses are willing to take the risks necessary to obtain financing and two-thirds of capital-seekers have been successful 100 percent of the time in previous efforts to obtain the growth capital they sought.

The study also found that female business owners are more risk-tolerant than women and men in general when saving or investing for their households. More than half the female entrepreneurs–57 percent–said they were willing to take above-average or substantial financial risks compared to 14 percent of all women and 26 percent of all men who participated in the 2001 Survey of Consumer Finances conducted by the Federal Reserve.

To some, like Johnson, the results of the study are obvious.

“Think about it,” she said. “If you are starting a company and financing it though your credit cards or going to mortgage your home with an uncertain outcome . . . this requires a person who has a passion for an idea; who is willing to take a risk and who wants to make a difference. These are all characteristics of an entrepreneur.”

Marianne Sullivan is a Boston-based freelance writer who writes frequently on economics and finance.

For more information:

Are Women More Risk Averse?
Nancy Ammon Jianakoplos and Alexandra Bernasek:

Center for Women’s Business Research–
Women Business Owners: Risk Takers
Well Positioned for Continued Growth:

Note: Women’s eNews is not responsible for the content of external Internet sites and the contents of Web pages we link to may change without notice.