by Eric Markovitz via Inc.com
Women own about 40 percent of the private businesses in the United States, according to the Center for Women's Business Research. But according to Astia, a group that supports women-led small companies, women make up less than 10 percent of venture-backed start-ups. As of last year, only 14 women had been funded by Y Combinator out of a total of 208.
That's a disparity that some, including Cindy Padnos, have found troubling. It's not because of any bias it might imply. Padnos finds the numbers so disturbing because she believes start-ups are missing out on a very valuable resource that are actually quite important for their health. That resource is the presence of women.
Padnos started her career as a tech entrepreneur and later served as president and CEO of a software company. These days, she has segued into life as a venture capitalist and has launched Illuminate Ventures, an early-stage venture fund that invests in cloud computing start-ups, based in Oakland. The advisory board of Illuminate Ventures, notably, is two-thirds women.
"I thought I saw a growing disparity between the growth in the number of venture-backable women, and the actual dollars that were going into companies that had women on the founding team," Padnos says. "And I was confused by that."
To address her hypothesis, Padnos, along with two MBA researchers from Carnegie Mellon, released one of the most comprehensive research reports to date on the state of women in venture-backed start-ups, titled High Performance Entrepreneurs: Women in High-Tech.
Among its many findings, the report, released in February 2010, concluded,
"Women-led high-tech start-ups generate higher revenues per dollar of invested capital and have lower failure rates than those led by men. Data clearly shows that high-tech venture-backed companies founded by women do as well as those led by men despite often being capital-constrained. Portfolios that lack this diversity are likely to suffer over time."
In other words, gender diversity yields positive results for start-ups, especially when women hold management positions. But why? And if the research is indeed true, how should start-ups go about finding more women?
Three Ways Startups benefit from Diversity: