Researchers at Babson College identify enormous, untapped opportunity for venture capitalists to drive new growth and innovation by investing in women entrepreneurs.

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Babson College has unveiled the findings of a new study on venture capital funding for women entrepreneurs and ways venture capitalists can capitalize on the significant gender gap that persists. 

Entitled Women Entrepreneurs 2014: Bridging the Gender Gap in Venture Capitalthe study was conducted by Babson professors leading the Diana Project™, a program founded in 1996 to research women-led businesses globally. 

The report provides the first comprehensive analysis of U.S. venture capital investments in women entrepreneurs in 15 years.

Key Findings

  • Since 1999, women entrepreneurs have made considerable progress in obtaining venture capital, however, a wide gender gap persists.
    • ​​​​The amount of early-stage investment in companies with a woman on the executive team has tripled to 15 percent from 5 percent in the last 15 years. Despite this positive trend, 85 percent of all venture capital–funded businesses have no women on the executive team. Importantly, only 2.7 percent of venture capital-funded companies had a woman CEO.
  • Businesses with women entrepreneurs perform as well as or better than those led by men. 
    • Businesses with a woman on the executive team are more likely to have higher valuations at both first and last funding (64 percent higher and 49 percent higher, respectively).
  • The composition of venture capital firms matters for women entrepreneurs. 
    • 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 of firms with a woman partner compared to 13 percent of firms without a woman partner) and more than three times as likely to invest in companies with women CEOs (58 percent of firms with women partners versus 15 percent of firms without women partners).
  • There is a declining number of women decision-makers in the venture capital community. 
    • The total number of women partners in venture capital firms has declined significantly since 1999, dropping to 6 percent from 10 percent.

"Enormous untapped investment opportunity exists for venture capitalists smart enough to look at the numbers and fund women entrepreneurs."

- Candida G. Brush

“Enormous untapped investment opportunity exists for venture capitalists smart enough to look at the numbers and fund women entrepreneurs,” said Babson professor, report author, and Diana Project™ co-founder Candida G. Brush. “Only a small portion of early-stage investment is going to women entrepreneurs, yet 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.”

“For years, it was believed that women entrepreneurs needed to change their approach to networking, pitching or industry sector in order to secure venture capital,” commented Patricia G. Greene, a co-founder of the Diana Project™ and the Paul T. Babson Distinguished Professor of Entrepreneurial Studies at Babson. “It is increasingly apparent that many women entrepreneurs have followed these prescriptions, yet they have not been able to achieve proportionate increases in early-stage growth capital. The tremendous work within the entrepreneurship ecosystem to support and foster growth of women entrepreneurs, and the findings of this study, demonstrate it is not the women who need fixing; the model for venture capital that has been in place since the 1980s simply does not work for women entrepreneurs.”

Authored by Babson Professors Candida G. Brush, Patricia G. Greene, Lakshmi Balachandra​, and Visiting Scholar Amy E. Davis, the study was generously sponsored by EYBabson’s Center for Women’s Entrepreneurial Leadership, and the Diana Project™. The study analyzed 6,793 unique companies in the United States that received venture capital funding between 2011 and 2013.

“While there has been progress made, clearly venture capitalists are leaving a lot on the table by not seeking out and being more open to funding women entrepreneurs,” said Babson President Kerry Healey. “Closing the gender gap and providing greater funding opportunities for women entrepreneurs not only makes good financial sense for venture capital firms, it also will drive new economic growth and spur innovation.”

Recommendations to Improve Women Entrepreneurs’ Access to Venture Capital

  • Examine the reasons why so few women choose to enter or stay in venture capital roles and call on the venture capital industry to do more to recruit and promote women investors to partner level roles in order to increase the number of women investment professionals
  • Showcase the successes of growth-oriented, venture capital–funded women entrepreneurs in order to change the social perception that only male entrepreneurs can be successful in venture capital funding
  • Examine if gender and/or geographical biases are part of venture capital decision-making process, and do more to seek out early-stage, women-led businesses, including those in states across the country

“Women entrepreneurs are a powerful force in the American economy and deserve even greater attention and resources to help grow and scale their companies,” said Kerrie MacPherson, principal, Ernst & Young LLP and North American EY Entrepreneurial Winning Women™ Executive Sponsor. “We have seen firsthand how a lack of access to capital can limit businesses with a woman on the executive team from reaching their full promise. While a significant number of organizations have emerged to help support, train, and celebrate women entrepreneurs, more must be done to ensure women entrepreneurs have the funding they require to accelerate their growth and achieve their full potential.”

The report findings and recommendations were shared on September 30 at an event presented by Babson's Center for Women’s Entrepreneurial Leadership in partnership with the EY Entrepreneurial Winning Women Program and hosted by Sullivan & Worcester in Boston. Moderated by Kerrie MacPherson, principal, Ernst & Young LLP and North American EY Entrepreneurial Winning WomenTM Executive Sponsor, a panel discussion explored how to bridge the gender gap in venture capital funding, featuring investment community leaders and women entrepreneurs, such as John Burns, chief investment officer at Breakaway Innovation Group, Terr​y McGuire, founding partner of Polaris PartnersJules Pieri, co-founder and CEO of The Grommet , and Scott Johnson, founder and managing partner of New Atlantic Ventures. ​​​​​​​​​​​​​​​​​​​​​​​​​​​​

About Babson College

Babson College is the educator, convener, and thought leader for Entrepreneurship of All Kinds​​​​​®. The College is a dynamic living and learning laboratory, where students, faculty, and staff work together to address the real-world problems of business and society—while at the same time evolving our methods and advancing our programs. We shape the leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to create economic and social value. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought and Action​​​​​​​​​​​​​® as the most positive force on the planet for generating sustainable economic and social value.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

By Michael Chmura,, 781-239-4549 | 09/30/2014 06:05