By Marie Szaniszlo
The amount of early-stage investment in companies with women on their executive teams has tripled to 15 percent since 1999, though the vast majority of venture-capital-funded firms have no top women executives, a new Babson College study found.
The study — the first comprehensive analysis of U.S. venture capital investments in women entrepreneurs in 15 years — found that businesses with a woman on the executive team are more likely to have higher valuations at both first and last fundings.
“Enormous untapped investment opportunity exists for venture capitalists smart enough to look at the numbers and fund women entrepreneurs,” said Babson Professor Candida G. Brush, one of the report’s authors and co-founder of the Diana Project, a program that researches women-led businesses globally. “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.”
The study found 85 percent of all venture-capital — funded businesses still have no women on their executive teams, and only 2.7 percent of venture-capital-funded companies have a woman CEO, though businesses with women entrepreneurs perform as well as or better than those led by men.
The makeup of venture capital firms may be a factor, according to the study, which analyzed 6,793 U.S. companies that received venture capital funding between 2011 and 2013.
Venture capital firms with women partners are more than twice as likely to invest in companies with a woman on the executive team and more than three times as likely to invest in companies with women CEOs, the study found.
But there is a declining number of women decision-makers in the venture capital community.
Since 1999, the total number of women partners in venture capital firms has dropped from 10 percent to 6 percent, the study found.
Today, only 139 of the country’s 1,562 venture capital firms have women partners.