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Study finds women still lag in startup funding

Startups with female executives are three times more likely to receive venture funding than they were 15 years ago, but all-male teams still get six investments for every one that goes to a company with a woman on the masthead.

Those were among the key findings of a Babson College study presented Tuesday during a forum on female entrepreneurship hosted by the Boston law firm Sullivan & Worcester.

Researchers also found that even when a woman is part of a venture-funded startup’s management team, the odds that she is the boss are just 19 percent.

Overall, early-stage companies with female chief executives receive less than 3 percent of investments.


Venture-funded businesses represent a tiny fraction of all US companies and are often too small to be significant economic drivers.

But they garner outsized attention because they are inventors of products and services. Their potential to produce the next big thing is great enough that investors — trained skeptics — choose to back them over countless others.

“It’s very important to study them,’’ said Candida Brush, professor of entrepreneurship at Babson and coauthor of the study. “They’re very important to the US economy.”

Entrepreneurs and venture capitalists called the findings disappointing and even surprising — overt gender bias is rare, they said.

But in the male-dominated world of venture capital — where researchers found only 6 percent of firms have a female partner, down from 10 percent in 1999 — subtle cues may discourage women from pitching investors in the first place.

“I think VCs live in 1962,” said Jules Pieri, chief executive of The Grommet in Somerville, an online marketplace that showcases little-known products. “When I walk into the offices, the only women there are serving coffee.”

The Babson study, part of a long-running research effort called the Diana Project, did not examine the success rate of pitches by female entrepreneurs, though investors said that in their experiences men and women succeed at similar rates.


The problem, they suggested, is a dearth of funding proposals from women-led companies.

“The reality is 3 percent is not far off the percentage of pitches I see that are run by female entrepreneurs,” said John Burns, chief investment officer at Breakaway Innovation Group in Boston. “My big takeaway is we need to increase the pipeline of female entrepreneurs.”

One reason why women are less likely than men to pitch investors could be that they often believe their companies should be more developed before they seek venture funding, said Katie Rae, managing director of the Boston venture capital firm Project 11.

Indeed Babson researchers found women-led companies, while fewer in number, tend to attract larger initial investments — an average of $6 million, compared to $4 million for all-male startups — suggesting more proof of concept at the time of pitching.

The study examined venture investments in 6,793 companies over the last three years.

Rae, who did not attend Tuesday’s forum, pointed to other studies in fields from business to politics that show men are generally more willing to take risks when the odds are against them.

She added venture capitalists who want to discover promising companies earlier should invite pitches from women.

“In venture what you hear all the time is it’s impossible to get funded,” Rae said.

“That’s the language we use, and therefore women look at it and say, ‘I’ll just figure out another way.’ So they bootstrap for a much longer period of time and don’t raise capital. It’s not that their ideas are worse — in fact a lot of it is women opting out,” she said.


Callum Borchers can be reached at Follow him on Twitter @callumborchers.