Babson study: VC for female entrepreneurs still lags
Women have made strides in raising venture capital in the last 15 years, but a wide gender gap persists, according to a Babson College study on the topic.
Entitled ‘Women Entrepreneurs 2014: Bridging the Gender Gap in Venture Capital,’ the study was conducted under the Diana Project, a program founded in 1996 to research women-led businesses across the globe. Babson said it provides the first comprehensive analysis of the U.S. venture capital for women entrepreneurs in the last 15 years.
On the bright side, the study found that early-stage investment in companies with a woman serving on the executive team has tripled to 15 percent since 1999. Businesses with a woman on the executive team are also tend to perform better, with higher valuations at first and last funding than companies will all-male executive teams. The difference in valuation is 64 percent and 49 percent higher, respectively, the study found.
Still, women-led businesses that are funded by venture capital are relatively few. The study found that 85-percent of all venture capital-funded businesses have no women on the executive team, and just 2.7 percent of those companies had a female CEO.
Perhaps more troubling for women executives of early-stage companies is that the number of women working as partners at venture capital firms is declining. According to the Babson study, the number of women partners has declined from 10 percent in 1999 to six percent in 2014.
That’s significant, because the study shows that venture capital firms with women partners are more than twice as likely to invest in companies with a woman on the executive team (34 percent) than firms that are run by men only (13 percent.)
Diana Project co-founder Candida G. Bush, who authored the report, said the findings present an opportunity to venture capitalists.
“Our data suggest that venture capital-funded businesses with women on the executive team perform better on multiple dimensions. The venture capital community, therefore, may be missing good investment opportunities by not investing in women entrepreneurs,” Bush said in a statement.
The Babson study recommends further examination of the factors hindering venture capital investment in businesses led by women, including why fewer women are working in the venture capital industry, and whether gender or geographical biases are part of venture capitalists’ decision-making processes.
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