I am a venture investor and a former investment banker. I'm also a woman. At my first job, there were equal numbers of male and female trainees. But over 25 years in business, I've become one of the few women in boardrooms listening to pitches and negotiating deals. I'd grown accustomed to seeing few pitches from high-growth companies led by women even though I personally know many women whom I would back in a second. Why weren't they pitching me?
A recent reading of "Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers" a study by Lesa Mitchell of the Ewing Marion Kauffman Foundation validated my gut. Mitchell's report says women who are capable of starting high-growth companies that serve global markets may be our nation's secret weapon for achieving sustained economic growth. C'mon, women entrepreneurs, it may take a little time but we can do this!
So, what are the obstacles in our way?
• Women are well-educated and employed, but they are not rising to leadership in significant numbers. Women earned 60 percent of the master's degrees and more than half the doctorates in the 2008-2009 school year, marking the first time in U.S. history that women earned more Ph.D.s than men. Meanwhile, women have grown to represent the majority of the labor force for the first time. So it's ironic that more women are not moving into leadership positions. A measly three percent of Fortune 500 CEOs are female. We could use more women in roles of power and influence that could lead to, or influence, entrepreneurship.
• Women entrepreneurs are starting fewer high-growth companies. In 2008, women owned 50 percent of privately held businesses in the United States, employing more than 13 million people and generating $1.9 trillion in annual sales, according to the Center for Women's Business Research. But only three percent of female entrepreneurs owned high-growth firms -- those with revenues of $1 million or more -- compared with 6 percent of men-owned firms. Instead, most of the women started lifestyle businesses that, by definition, were lower-growth enterprises.
Some women express that they prefer small-yet-profitable lifestyle businesses because these provide income and power while allowing their owners to maintain more of a work/life balance. But growth entrepreneur Jodi Marchewitz, CEO and founder of the software company iGuiders in Cleveland, Ohio, has found it's not an all-or-nothing proposition. Marchewitz relies on her husband - and his job flexibility -- to care for their twins while she does business. "It's definitely a delicate balance," she said.
Here's another way to look at it: Although women faculty excel at research, they lag their male counterparts in patenting research results by more than 2-to-1, according to a 2006 report in Science magazine. Women scientists also rely more heavily on formal university resources to commercialize their research. This makes it far less likely that women academicians will launch spin-out companies based on their findings. By contrast, men scientists tend to establish new networks and seek commercialization guidance from private industry - a tenet of entrepreneurship.
• Women entrepreneurs don't get their share of investment. Only 11 percent of venture-backed technology firms in 2009 had current or former female CEOs or founders, according to Dow Jones VentureSource. And only 9.4 percent of angel investment went to women entrepreneurs in 2009, the Center for Venture Research found.
Why is that? As I mentioned earlier, statistics show that women often start and grow the kinds of businesses that don't interest investors. "Some women who have ideas, develop products, find solutions for problems or see themselves as leaders of a social cause, not as entrepreneurs," said Candace Klein, founder and CEO of Bad Girl Ventures in Cincinnati, Ohio.
Not seeing themselves as entrepreneurs may contribute to the fact that far fewer women ask for venture capital. "When I went to the Three Rivers Venture Fair in Pittsburgh several weeks ago, only a handful of women were there," Marchewitz said. And some women who do ask come ill-prepared. "They're not projecting aggressive enough growth," Klein was told when she asked male VCs why they didn't invest more in women.
And the truth is that 95 percent of venture capitalists and 85 percent of angel investors are men. VCs and angels generally invest in people they meet through their personal networks and with whom they are comfortable - which in these cases will probably be male entrepreneurs.
So, why should we care? Because female-led startups that receive the same level of capital investment as those led by men could add 6 million jobs to the economy within five years, proposes an Ernst & Young report. And those startups stand a good chance at success. Fortune 500 companies with three or more women on their boards for at least four years had an 84 percent higher return on sales, 46 percent higher return on equity and 60 percent higher return on invested capital, according to a Catalyst report.
Based on demographics, there will be more women than men entering the workforce over the next decade, and most of these women will be well-educated. I think that, like all things, more women starting and leading successful high-growth, job-creating companies will take time. As more women have successes, more women will cycle back and mentor, make connections for future entrepreneurs, creating networks of commercialization and industry partners, tap women for their boards, and invest in female-owned or female-led companies.
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