Successful startups have more women in senior positions than unsuccessful ones, according to a new analysis by Dow Jones (NWSA) VentureSource of more than 20,000 venture-backed companies in the U.S. between 1997 and 2011. They had more than twice as many women in top jobs like C-level managers, vice presidents, and board members than their unsuccessful counterparts did.
Companies that went public, were acquired, or turned profitable were defined as “successful.” “Unsuccessful” included both failed companies and “not-yet-successful” startups still operating that may eventually go public or get acquired. At successful companies, the median share of female executives was 7.1 percent, compared with 3.1 percent at unsuccessful firms.
There’s a distressing finding buried in the report: Even as companies with women in other top management roles performed better, those with female chief executives were less likely to succeed—by 21 percent, according to Maryam Haque, one of the researchers behind the report. It’s important to note the data don’t indicate why these companies succeed at different rates. The study doesn’t tell us whether women CEOs are less effective leaders, for example, or if they face biases from customers or investors that influence their companies’ performance, or if women are more likely to start companies in industries with higher failure rates.
What’s astonishing, though, is just how few women hold top positions in venture-backed companies, even by the lopsided standards of the rest of the business world. Consider: Women own 28 percent of all businesses in the U.S. Women make up about 16 percent of board members and corporate officers of the Fortune 500. That’s still a lousy record considering women are 51 percent of the U.S. population and better educated than men. But even that 16 percent puts the Fortune 500 way ahead of the VC-backed universe: Of the roughly 168,000 executives at companies in VentureSource’s analysis, less than 7 percent were women.
Let that sink in for a minute. The world of VC-backed companies, which prides itself on being cutting edge, lags both Main Street and corporate America in women leaders. It’s true that the VentureSource sample goes back to the 1990s and includes lots of companies that no longer exist. But even by the late ’90s, women occupied 10 percent of top jobs in the Fortune 500.
This should be a wake-up call for the VC industry, a notorious boys’ club that purports to be a meritocracy. “For the last 15 years, what has been the percentage of women investors making those decisions to get these companies going? My guess is it was very small,” says Shaherose Charania, CEO of Women 2.0, a company that aims to increase the number of women founders in tech startups through media and events.
Anecdotally, Charania says more startups led by women have taken off in recent years. She rattles off a handful of entrepreneurs who have had big exits in 2012: SlideShare, co-founded by CEO Rashmi Sinha, is being acquired by LinkedIn (LNKD) for $119 million, and Google (GOOG) is paying $250 million for Wildfire, a maker of social media marketing software co-founded by CEO Victoria Ransom.
Charania expects the picture will look different in the years ahead as companies founded more recently grow. “There are more women going from, ‘I have an idea’ to ‘I’m quitting my job and I’m starting,’ and they’re holding that CEO role in the very earliest stages of the startup,” she says. And more women investors are funding them.
In the public markets, research shows companies with women on their boards outperform companies with all-male boards. The VentureSource report suggests startups with women in management do better as well. Maybe the most surprising thing is what’s taking VCs so long to catch on.