Financing Entrepreneurship: Is Gender an Issue? Candida G. Brush Boston University
Financing Entrepreneurship: Is Gender an Issue?! The Context! The Issue! The Diana Project! The Data! The Implications
Current Context - Women s Entrepreneurship 1992 1997 6.4 million businesses 5.4 million businesses 38% of all businesses 26% of all businesses $1.57 trillion revenue $818.7 billion revenue 13 million employees 7.1 million employees U.S. Census Figures for 1997 released April 4, 2001
Current Context Recast Definitional Change: Women Owned Businesses are Privately Held Firms in which women own 51% or more 1997 1997 5.4 million 5.4 m +2 m=7.4 businesses million businesses 26% of all businesses 36% of all businesses
Current Context- Venture Capital 1999 2000 $48.3 billion $103 billion 3,649 companies 5,380 companies $13.2 million average $19 million average - NVCA.org (3/2001)
Venture Capital Investments in Women-led Firms In 1996:! 1,200 firms received venture capital! 30 were run by women! 2% of the $33 billion invested by venture capitalists 1991-1996 went to female- led firms Source- Stout, 1997.
The ISSUE: WHY IS THE EQUITY INVESTMENT IN WOMEN-LED VENTURES SO tiny?
The Diana Project Candida G. Brush- Boston University Nancy Carter- St. Thomas University Elizabeth Gatewood -Indiana University Patricia G. Greene -University of Missouri-Kansas City Myra M. Hart Harvard University Funding support- Kauffman Center for Entrepreneurial Leadership US Small Business Administration National Women s Business Council
The Diana Project Purpose:! To investigate supply of and demand for equity capital! To compare growth models in male and female-led ventures Method: 1. Mapping of Investments NVCA data 1957-1998 by gender 2. Human and Social Capital; Strategic Choice Springboard 2000 Venture Forums Panel Study of Men & Women Led Ventures 3. Structural Barriers Venture Capital Industry
Theoretical Approaches Relationship Venture Capital Firm (Investment Process) Relationship Value Added Interaction Quality Human Capital Structural Barriers Investor Entrepreneurial Firm/ Investee Strategic Choice Source: Adapted from Fried & Hisrich, 1988, Timmons & Sapienza, 1992; Timmons & Bygrave, 1997.
1. Investments in Women-led Ventures 1988-1998 (NVCA data) Stage women men seed= 62% 55% buy out= 7.9% 14% Percent! 3.5 % for all years (290 of 8298)! 4.1% in 1998 n= 54! 3.5% in 1997 n= 52! 3.8% in 1996 n= 43
1. Investments in Women-led Ventures 1988-1998 (NVCA data) (% of Total) women men Sector software 2.4% 36% med. /health.9% 14% biotech.6% 7% communications.4% 14% Region! Men & women led ventures receiving equity most often located on west or east coast,! Women located in mid-west, central and south less likely to receive investment.
1. Investments in Women-led Ventures Springboard 2000 Forums for Women-led Ventures (SF, Boston, DC)! 900 applicants! 84 presenters! Total capital sought: $1.02 billion! Average: $10 million! $400 million raised + 1 IPO! Average: $4.5 million
2. Human Capital Profile of Presenters from Springboard 2000 Forums for Women-led Ventures! 2 nd round funding! 60% had revenues! Sector: technology based; life sciences, communications, software, internet! Employees- average 25! Management Team Size- average 4! Experienced management
2. Human and Social Capital in Women-led Ventures Receipt of equity capital is related to:! Human capital -education level, venture start-up experience and financial training! Social capital- more outside advisors and strong ties with them; more diverse networks! Interaction of human and social capital best predictor - NFWBO data analysis, 2000
3. Women in the VC Industry: 1995-2000 1995 2000 Increase Total Women 340 563 66% Total People in Industry 3647 6086 67% % Women 9% 9% Increase Selected Titles: Associate 41 59 44% Principal 6 31 417 Partner 65 84 29% Managing Director 13 41 215% Chair, CEO 2 6 200%
Financing Entrepreneurship: Is Gender an Issue? YES!! Overall disparity- women own 40% of US businesses and are receiving only 5% of venture capital funding! Social networks are crucial yet few women in venture capital industry! Gender differences sector, stage investment, geography, average funding amount
The Implications:! Wealth Creation- Lack of investment in women-led ventures diminishes the opportunity for women to grow and create wealth! US Economy- Lack of equity may limit growth and diffusion of innovations, job creation and economic contributions of women-led ventures to the US economy! Investment Opportunities- The venture community may be missing out the chance to fund and receive returns from good investments
$$$ The Bottom Line: We need to encourage and facilitate equity investment in ALL entrepreneurial ventures, not just those led and founded by men.
Public Policy Suggestions:! Track investments and performance of these by gender in all venture funded companies! Encourage investors to seek out and consider investment in women-led ventures! Encourage programs to educate & prepare women to lead fast growth/high tech firms! Sponsor forums to link women with potential investors! Encourage and educate women to participate in the investment process (angels, corporate venture funds, venture capital)
The End
Research Questions:! Do women-led venture capital funded businesses perform as well as men led businesses?! Do venture capitalists perceive women-led ventures to be more risky investments?! Is there a bias against women of child bearing age when they seek equity capital?
Anecdotal Evidence:! Women led venture capital funded ventures perform as well or better than men led businesses! Women have to work harder to overcome subtle perceptions about their capability to manage high-growth & high tech ventures! Women don t think big enough or ask for enough money