Kauffman Fellow Alicia Robb Ignites Efforts to Bridge the Gender Gap in Venture Capital & Entrepreneurial Business

Shannon Beeman
October 15, 2015

“Women are significantly underrepresented in the leadership ranks of angel funds, venture capital firms and venture-funded entrepreneurial companies,” said Alicia Robb, a senior fellow at the Ewing Marion Kauffman Foundation. “That persistent gender gap,” she added, “is bad for American business and needs to be addressed.”

Speaking to a gathering of 110 female venture investors and entrepreneurs at the inaugural Women Who Fund conference on October 8 in Ann Arbor, Robb observed: “When half of the population isn’t participating fully in the economy, everybody loses. Women make great employers, create great products and build great companies. The media, and we ourselves, are not doing enough to highlight some of the successes of female investors and entrepreneurs.”

The Women Who Fund conference was hosted by the Zell Lurie Institute and the Center for Venture Capital and Private Equity Finance at the University of Michigan’s Ross School of Business.

Robb cited recent findings from a Babson College research study which showed that the total number of women partners in venture capital firms has declined since 1999, dropping from 10 percent to six percent. Furthermore, Babson researchers reported that 85 percent of all venture capital-funded businesses have no women on the executive team, and that fewer than 3 percent of these companies have a female CEO. Although the gender gap in angel funds is slowly closing, women still account for just one-quarter of all angel investors and one-third of all entrepreneurs seeking angel capital.

The ramifications of the gender gap in venture capital and entrepreneurial business are pervasive, observed Robb, who has written two books and countless articles about financing and advancing women-owned businesses. On the funder’s side, studies have shown that male investors are less likely to see the market fit for innovative products and services developed by female entrepreneurs, or for female consumers; therefore, they are less inclined to provide seed and early-stage financing to women-led start-ups.  “This lack of diversity on the funder’s side is problematic, because investors are not funding things we [as women] want to see in the market,” Robb remarked. “Capital is the key factor in getting more women to scale their businesses.”

She said there are many advantages to including women in the leadership circles of venture investment funds and venture-backed companies. In the Babson study, researchers found that:

  • Businesses with women entrepreneurs perform as well as or better than those led by men. Specifically, companies with a woman on the executive team are more likely to have higher valuations at both first and last funding (64 percent higher and 49 percent higher, respectively).
  • The composition of venture capital firms matters for women entrepreneurs.VC firms with women partners are more than twice as likely to invest in companies with a woman on the executive team (34 percent of firms with a woman partner compared to 13 percent of firms without a woman partner). These firms are also more than three times as likely to invest in companies with women in the CEO role (58 percent of firms with women partners versus 15 percent of firms without women partners).

Consolidation in the U.S. venture capital industry – which shrank to 500 active VC firms in 2013 from 1,000 VC firms in 2000 – partly explains the shortfall in the number of women entering the sector. Fewer firms mean fewer job openings and fewer opportunities for women to get a toehold in the industry. Women also hobble their own career ambitions because they are often unaware of the opportunities in venture investing. In addition, they often feel unprepared or reluctant to make their initial investment, or lack critical network connections with other investors.

Recently, Robb has taken steps to bridge the gender gap in venture investing. Working through Next Wave Ventures, she has launched the Rising Tide Fund and Angel Training Program, which provides women with the education and training they need to become sophisticated angel investors. The initiative allows participants to build a diversified portfolio of investments, receive mentoring by women who are experienced angel investors and increase their knowledge through online coursework.

“We need to publicize more of the great things women are doing in this industry and move more women into the spotlight,” Robb said.