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Monika Desai from Open Runway (A MassChallenge Finalist) on Where are all the Women?
Here’s the Challenge, Here’s the Pitches, Open the Door…where are all the Women?
As an entrepreneur launching my first startup, I rarely think about the fact that I am a woman but it’s hard not to notice when I am usually one of just a handful of women in the room at most of the entrepreneurial events I go to. Take for instance, WebInno. It always seems like 80% of the attendees are men and only 20% are women. There are even less women who are actually up there demoing their companies.
It’s not just Boston. I noticed the same 20% trend as a participant of the First Growth Venture Network, a mentorship program for high potential tech based startups in NYC. Of the 14 startups participating in the program only 3 of them had female founders.
That’s why it didn’t surprise me to learn that of the 425 applicants who applied to MassChallenge, only 18% were female. Because there were so few female entrants, only 15 of the 110 finalists are woman (see list of female finalists here). For those of you keeping track that’s 13%!
After learning that I was one of only a handful of women founders that applied to MassChallenge, I started wondering if the trend I was seeing was indicative of the rest of the nation. A quick search revealed that it is: only about 20 percent of U.S. companies with $1 million or more in revenue are women-owned.
Why are there no Women?
I wanted to understand why there are so few women entrepreneurs starting high potential, high growth companies so I embarked on some research. While I came across several theories, I came to the conclusion that there are 2 main factors: 1) lack of access to capital and 2) few role models.
Less Access to Capital: According to the Center for Women’s Business Research, data shows that while about 41 percent of private companies in the U.S. are owned by women, only 3 percent to 5 percent of them get venture capital. The US Global Entrepreneurship Monitor says that women start ventures with eight times less funding than their male counterparts. I thought perhaps women were simply not seeking capital but then I saw this stat: women-owned businesses accounted for 21 percent of the entrepreneurs that sought angel-investment capital in 2009, but only 9.4 percent of those females were successful in their quest, according to a report published by Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire.
While there are several reasons why women have less access to capital, one factor is the scarcity of female venture capitalists. A quick look on TheFunded revealed that only 3 of the 95 venture capitalists on the 7/19 list of “Top VCs” were women. Research shows that having female VCs does have an impact on women getting funded. According to Cindy Padnos of Illuminate Ventures, a venture capitalist, firms with at least one woman partner are 70 percent more likely to lead investments in a woman-run company than a VC firm with all male partners.
Few role models: How many women can you name that have founded companies that have become household names? I don’t know about you, but I can count them on one hand. In the tech space, at the highest level in the biggest companies, we have a handful of role models: Meg Whitman (eBay), Carly Fiorina (HP), Carol Bartz (AutoCad, Yahoo!), Marissa Mayer (Google) – great women, great leaders, instrumental in their company’s success but they didn’t found these companies. Women need more examples of women who have founded and led high impact companies to inspire them to build high growth companies.
Women Build Great Companies
So why do we need more women entrepreneurs anyway? The bottom line is that women led ventures ROCK. Here are a few interesting stats that show why:
• Women are more Capital Efficient: Venture backed companies run by women have 12% higher annual revenues than those run by men using on average one-third less committed capital according to a study by British researcher, Library House.
• Women create more Jobs: A Babson College study found that if female entrepreneurs started with the same capital as their male counterparts, they would add 6 million jobs to the economy in 5 years – 2 million in the first year alone.
• Women do more with Less: Venture-backed start-ups run by women use, on average, 40 percent less capital than start-ups run by men and are increasingly involved in successful initial public offerings of stock, according to a recent white paper by Illuminate Ventures.
• Women Fail Less often than Men: Despite having less capital, women-owned businesses are more likely to survive the transition from start-up stage to established company (Illuminate Ventures)
A New Wave
All that said, I do think we are on the cusp of a dramatic shift. A new wave of women entrepreneurs are quickly leveraging existing technologies to create new business models online that are disrupting industries. GILT founded by Alexis Maybank & Alexandra Wilkis Wilison is a perfect example of this. GILT is one of the fastest growing companies in e-commerce history, and has made Flash Sales a household word. There are hundreds of competitors both in the US and worldwide that are all trying to capture the GILT magic for every conceivable niche.
Caterina Fake (Flickr, Hunch) is another favorite of mine. Flickr, the company that she co-founded completely disrupted online photo sharing, people’s perception of content sharing, and showed the hundreds of companies that followed that the freemium model can create a self-sustaining and capital efficient business. She’s now moving on to her second, big endeavor, Hunch, and has teamed up with some top tier investors and advisors.
These women and others, who are creating disruptive companies, and having successful exits are laying the foundations of a new generation of role models, and are tearing down the barriers that might keep women from embarking on building high growth, high return companies.
Look out world, here we come!
By: Monika Desai
About Monika Desai
Monika the co-founder and CEO of Open Runway, a social commerce platform that empowers shoppers and emerging designers to create and shop for women’s fashion (starting with shoes) through customization and community-voted design contests. Monika is a MassChallenge finalist in the 2010 competition. Monika is always looking to meet like-minded entrepreneurs. You can tweet her @monikaadesai or email her at monika@openrunway.com.
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Women build great companies
I love your list of the benefits of women-owned and led companies. I do think we are much more careful with money than men are (on balance) and we see this around the world in use of household budgets.
Robin
(founder & former CEO of Zipcar, and GoLoco).
Monika, Thank you for this
Monika,
Thank you for this blog post. I agree we need more role models.
Over the last 10 years I have encountered fewer women on executive teams. I worked with more executive women in the 1990s and early part of this century than I do today.
While I don't have any statistical evidence, it seems that many of the trail blazing women that came before us have opted out of traditional executive roles to pursue alternative careers.
The shortage of executive woman, CEOs and board members doesn't exist only in start-ups - it extends to the largest companies as well. According to InfoPlease, "...as of 2009, only 12 Fortune 500 companies and 25 Fortune 1000 companies have women CEOs or presidents.
Catalyst, the not-for-profit New York-based women's research organization, points out that its data shows a change over the last ten years. In 1998, 11.2% of corporate officers in Fortune 500 companies were women. This percentage rose to a peak of 16.4% by 2005, but has since fallen and in 2008 it rested at 15.7%. While this is progress, Catalyst notes that, at this rate, it would take 40 years for the number of female corporate officers to match the number of male officers."
The good news is that inspiring women like you will fill that void. I look forward to watching the success and growth of the many women led startups in the Boston area.
Women Entrepreneurs - here we come!
Monika,
your blog is very encouraging and I do agree that women CEOs and Founders are going to change in the way business is conducted. Flexibility and Capital Efficiency are part of that potion. The new Wave as arrived and I bet some barriers will go out to sea!
Keep up the good work!
Rudi Scheiber-Kurtz, CEO
Next Stage Solutions, Inc.
Your Post
Bravo for your success Monika!
Let's not forget people like Donna Dubinsky (Palm and Handspring), Diane Greene (VXtreme and VMware), Jean Kovacs (Comergent and Qualix Group), Liz Fetter (QRS and NorthPoint), Michele Klein (Boxer Cross and High-Yield Technology), Alison Malloy (Design2Launch), Kira Makagon (Octane), Kathy Levinson (E*TRADE Financial) when we think of women co-founders with significant exits that have generated venture-level returns. All of these successful entrepreneurs and others are members of our business advisory council at Illuminate Ventures and are active in supporting high-tech entrepreneurship in a variety of additional ways. The companies founded by these women have fundamentally changed the way that we communicate (with smartphones) the way we manage our data (leveraging virtualization) and have positively impacted many other aspects of both our business and personal lives.
Even that list is just the tip of the iceberg, however. The number of venture-backable women – those with the right educations, the skills and experience – and the desire to be entrepreneurs is growing dramatically. Take for example the world of initial public offerings. While the numbers are down overall in recent years, women’s participation has increased dramatically. The proportion of companies that have at least one woman at the officer level at the time of initial public offering has grown from just 10% in 1997 to over 55% in 2007. 17 of the 19 Tech IPOs in 2009 had at least one woman officer on their team. Yes, I know that one woman on a team does not represent critical mass, but it is an important factor – since VC’s frequently view team-members from prior IPOs as some of the most credible individuals for future investment.
Congrats
Monika
Congratulations on your success with MassChallenge. Thank you for this post. I agree that role models are an issue. Over the last 10 years, I have experienced fewer opportunities to work with other female executives. I don't have any broad statistics to back this up but it seems like many of the trailblazing women ahead of us have opted out of the main stream work force. As I have been more engaged with startups over the last year, I have seen many more women at networking events and leading companies. These are impressive women building innovative businesses. Women like you are important role models and key to bringing more women in to business leadership roles. It seems that women are still lacking at the top of more established companies. Only 3% of the Fortune 500 are headed by women.
Carol
Women Need Encouragement
Monika - What a great post. Thank you for all of this information. I will be reposting this and retweeting it for sure.
I've worked in many environments and have often found myself in the minority in a room full of men. I have never minded it. However I've supervised and employed countless women over the years, and I've found that women are hesitant to find the leader within themselves, and to believe in their own power. Women need encouragement.
When I was a younger woman, there were literally no women in charge at the top of any organization in which I was employed. Because of this, there were really very few role models. I luckily had a few male mentors who encouraged me, and mainly said to me - "With your skills, you can do anything that you decide to do." That meant more to me than any specific advice. A little encouragement, confidence and power go a long, long way.
Those of us who are women entrepreneurs, leaders, and managers, need to keep this in mind when working with women. There are scores of women out there with great ideas that they hesistate to put forth. Let's encourage them together, and perhaps, we won't be alone if the room for very much longer.
Julia Tanen
@juliatanen
Managing Director, KCSA
www.kcsa.com
Mentoring is important
Great post, Monika. Thanks for putting together all the research - next to launching your site this month/next month, that's pretty impressive!
I've been a technology entrepreneur for 10 years - the majority of that time I was in Europe. The male:female ratio is even worse over there. Usually, I was one of only 2-3 women at an event with 100 or more participants.
So the Boston area is actually 'Disneyland' for me. Since I moved here 4 years ago I've found great role models, supporters and mentors in women that have accomplished a lot entrepreneurially: Robin Chase (Zipcar), Gail Goodman (Constant Contact), Helen Greiner (iRobot), Diane Hessan (Communispace), Karen Miller (DoInk), Beth Marcus (Playsmrt), Sheila Marcelo (Care.com) and many more.
So inter-generational mentoring is happening as our numbers increase. With groups like our monthly SheEOs meeting, we can facilitate that mentoring in an informal way.
Bettina