- NEWS & ANALYSIS
September 03, 2013
The topic of women’s limited access to highly competitive venture capital (VC) dollars commonly finds its way into conversations about the state of women’s roles as economic players in the economy (Forbes, Businessweek,NYTimes).
While there are currently a lopsided number of VC rounds going to companies founded by men, PitchBook data show that companies with at least one female founder (women-founded) have begun to hit a stride, increasing their share of venture rounds every year for the last 10 years. In 2004, women-founded companies represented a paltry 4% of all U.S. venture deals. Now, such companies represent a record 13% of VC deals through the first half of 2013.
While men continue to receive disproportionate attention from U.S. VC firms, it does appear that the direction of change in the allocation of VC money is slowly trending upward to women, who own 28.2% of all businesses in the United States according to The Center for Women’s Business Research. The trend is more telling when looking at financings in the top 10 most active sectors. Through the first half of 2013, women-founded companies made up a record 40% of VC deals in the retail space and a record 33% in the consumer services space.
The clear laggard is in the heart and soul of the venture industry, the software sector. Software companies founded by women made up only 10% of the deals in that sector so far in 2013. But that’s still a record, and as women’s representation in the STEM (science, technology, engineering and math) subjects increases (women currently make up 31% of bachelor’s degrees and 41% of Ph.D.s in STEM fields, according to a recent White House study), women’s share of VC-backed software companies should continue to grow.
Women-founded VC-backed companies should also act as a feedback loop for other women-founded companies to eventually bring some level of parity to the allocation of VC dollars. A recent study sponsored by the Small Business Association’s Office of Advocacy found a positive and significant relationship between current or prior investments in women-led businesses (defined as a business with at least one woman in senior management) with future investments in other women-led businesses. The study also found a positive relationship between a venture capital firm’s investments in women-led businesses and that firm’s performance. This growing openness to women-led businesses should (if somewhat slower than some would like) continue moving the industry away from its male-dominated reputation.