Study: Female CEOs Receive Just 3 Percent of Venture Capital Funding

Chris Gaetano
Published Date:
Jul 27, 2017
Pay Gap

A recent study has found that female CEOs seeking funding for their businesses get only about 3 percent of total venture capital dollars, and that all-male teams are four times more likely to get funding than mixed-gender teams, said CNN Money. This is according to a study conducted by researchers at Babson and Wellsley colleges that looked at nearly 7,000 companies between 2011 and 2013. This 3 percent figure is out of $50.8 billion in total venture capital funding between those dates. 

"We did not determine any significant performance differences between companies with women CEOs from companies with men CEOs, so it is quite surprising that women are still, practically speaking, shut out of the market for venture capital funding, both as CEOs and participants of executive teams," said the study's conclusion. 

As for why, the researchers suggested that, since the venture capital world tends to be heavily male, women are not as included in the social networks. This means that they're less likely to have the social connections that a male entrepreneur can use to increase his chances of getting funding. The industry's heavily-male composition, too, could influence the rules, beliefs and practices to favor men, said the researchers. Finally, the paper pointed out that, in general, people tend to favor those who are more similar to them, and since entrepreneurs are likely going to be pitching before an all-male panel, it would seem likely that the investors would favor men. 

The researchers used data provided by a private company, Pitchbook, which tracks the full life cycle of M&A, PE and VC transactions along with the firms and professionals involved. This gave an initial data set of 10,433 companies, which was then narrowed down to 6,793 after filtering out those that were not backed by private equity or other forms of institutional capital between 2011-2013. Then, for each company, the researchers looked at whether there was a woman on the executive team or as CEO. 

The findings echo those of other studies showing that female entrepreneurs have a more difficult time securing venture capital funding than men. A 2014 study from MIT, for instance, found that investors prefer pitches presented by men compared to those made by women by 60 percent, even when the content of the pitch is the same; if the man is attractive, they're even more favored, adding a 36 percent increase in pitch success. The study also said in a controlled experiment the researchers conducted, identical business-plan videos were narrated by either male or female voices; respondents chose the plans presented by males 68 percent of the time.

“We don’t always like the results we find, but this sort of systematic evidence helps us to start a conversation and discuss ways to change biases and ensure that women can engage as effectively in innovation-driven entrepreneurship as their male counterparts,” says MIT professor Fiona Murray, a co-author of the MIT paper.

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