More women entrepreneurs are gaining access to venture capital, but a wide gender gap persists, according to a new study released Tuesday from Babson College.
According to the study, 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, 85 percent of all venture capital-funded businesses have no women on the executive team and only 2.7 percent of venture capital-funded companies had a woman as a CEO, according to the study.
Entitled “Women Entrepreneurs 2014: Bridging the Gender Gap in Venture Capital,” the study was conducted by Babson professors leading the Diana Project, a program founded in 1996 to research women-led businesses around the world. The report provides the first comprehensive analysis of U.S. venture capital investments in women entrepreneurs in 15 years.
Although access to funding of women-led businesses has improved, the problem might be found in the venture community itself. The study found the number of women partners in venture capital firms has declined significantly since 1999 —dropping to 6 percent from 10 percent. At the time of the report, 139 of the country’s 1,562 venture capital firms had women partners.
Among the study’s other findings:
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).