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Did you know that women-led, venture-backed organizations bring in 12 percent more money than companies led by men? Despite this fact, only 2.7 percent of venture-backed businesses have a woman CEO. Think about that.
So we can ask ourselves, “what is the cause of this?” While there have been many different speculations, there is a potential encouraging reason why this is happening: successful female business investors may be doing away with venture-backed companies all together in order to start their own venture firms.
Another reason for the declining number of women-led companies may be that women tend to fund other companies that are led by women and because male-owned companies are still largely predominant. There isn’t a whole lot of room for women who invest in other companies. The reason women investors tend to back women executives is because women understand the need for industries that are heavily led by women, whereas men may not see the full potential of these businesses.
For women struggling to get venture-backed investments, it may be more viable for them to leave their jobs and raise the funds themselves, says CEO of Full Circle CRM, Bonnie Crater. There are many women who have money, some are more intimidated to invest themselves, but others are jumping in. Companies invested by women are more likely to hire women, increasing the success of women in business.
The more women that invest in women-led angel groups, the greater likelihood that female entrepreneurs will be able to have investors give them a well-deserved chance.
A study on women entrepreneurs was performed by professors at Babson College, a learning laboratory where staff, faculty and students work to address issues in business and society. The professors did find that entrepreneurial women have made a great deal of progress in obtaining venture capital since 1999, but 85 percent of all venture capital funded organizations have zero women in the executive team. The professors made some key recommendations to turn this around, however.
These recommendations included spotlighting successful venture capital-funded women entrepreneurs to help alter social perceptions that only male entrepreneurs are capable of being effective in venture capital funding. Another recommended remedy was to explore whether or not gender and/or geographical favoritism is part of the venture capital decision-making process and for investors to do more to look for early-stage women-led businesses.
With all of the problems centered around women-led businesses not being successful in obtaining investments, it’s nice to know that we can work to change this and some of the reason women-led venture-backed companies are so few and far between is because some women are moving on to bigger and better opportunities; starting their own investment firms.