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Female start-up founders more likely to be driven by need than opportunity: Report

Friday, 21 December 2012 | By Michelle Hammond

The majority of Australian start-ups are motivated by opportunity rather than need, new research suggests, although the instance of necessity-driven motivation is slightly higher for female founders.

 

The research, conducted by the Australian Centre for Entrepreneurship Research (ACE), is based on surveys of 1,400 start-ups over a four-year period, from 2007-2011.

 

The study, titled The Comprehensive Australian Study of Entrepreneurial Emergence, is the most thorough study of emerging new ventures ever conducted in Australia, according to ACE.

 

Almost 90% of respondents said they are driven by positive, opportunity-driven motivation.

 

However, the instance of necessity-driven motivation is slightly higher for Australian female founders (14%) than for males (9%).

 

A larger difference is evident between the preference for “maximum growth” and keeping the firm “small and manageable”, with 27% of male-only ventures go for maximum growth, compared with 13% of female-only start-ups.

 

But according to ACE, the male-female division could be an oversimplification.

 

ACE classifies start-ups into three categories: male-only, female-only and mixed-gender team, with the third category constituting a “considerable share” of all start-ups.

 

Most of the mixed-gender teams are spousal or de-facto couples, with or without additional owners, ACE said.

 

Almost half of Australian business founders work in teams, the research reveals, but only a small minority of these are professional teams assembled primarily for businesses purposes.

 

“Team-based start-ups have more human capital at their disposal, but this is not a clear-cut relationship,” ACE said.

 

In addition to employees, ACE said start-ups tend to use “unpaid helpers” and a “variety of external sources of knowledge” to facilitate their start-ups.

 

“[However,] there are also indications that many founders do not draw sufficiently on social capital (network contacts) to counterbalance their own shortcomings,” it said.

 

“Less than a third of all nascent and young firms are active in face to face business networks.”

 

According to ACE director Professor Per Davidsson, the majority of new firms are not particularly innovative.

 

“However, compared to start-ups in the US, Australian start-ups are actually likely to be more innovative, emphasise research and development, and be based on new technologies,” he says.

 

Davidsson says more than half of all start-ups are self-funded, bypassing friends, family and banks for major funding.

 

Doing “much with little”, and letting revenue fund businesses development, are the “hallmarks” of skilled entrepreneurs, he says.

 

Interestingly, the research shows the global financial crisis had surprisingly small effects on the start-ups surveyed.

 

“Other research has found that the GFC led to lower entry rates as potential entrepreneurs delayed plans to start businesses,” Davidsson says.

 

“However, our data suggests that although about one third of the start-up attempts were terminated during the study, this was not because of the GFC.

 

“The onset of the GFC did not kill off or radically change many start-up efforts that were already underway.”

 

Davidsson says companies that fold often do so without suffering financial loss, and even rate their experience as positive, with a proportion closing one business in order to start another.