When Facebook went public on May 18, 2012, it did so with a Board of Directors that was exclusively male. This is not unusual among top public companies headquartered in California, home to the enclave of technology giants in Silicon Valley. In its seventh annual study titled "California Women Business Leaders: A Census of Women Directors and Executive Officers," the UC Davis Graduate School of Management found that women hold less than 10% of the board seats and top executive positions of the state's 400 largest companies representing $3 trillion in market value.
The 0.2% annual rate of improvement is so slow that the study projects women won't achieve parity with men for at least a century. While that's not good news for women, a growing awareness among them is providing inspiration to collaborate and help each other succeed as entrepreneurs.
The "Green Ceiling"
Researchers from the University of Utah's David Eccles School of Business have confirmed that investors are more likely to put money into new companies with male CEOs. The study, titled "Skirting the Issues: Evidence of Gender Bias in IPO Prospectus Evaluations," indicates the existence of a gender-based financial gap for companies seeking venture capital. Although almost half of all privately-controlled businesses are headed or owned by women, there's still unwillingness among private equity companies to invest in IPOs led by women.
Researchers studied 19 hi-tech IPOs conducted in 2009 and found none led by women. Seventeen of those companies had one or more female executives below the CEO level, where women made gains from 10 to 55% during the 10 years spanning 1997 to 2007. Despite those gains at the lower executive levels, bias still exists at the top level among new companies going public. Women with identical personal qualifications running companies with comparable financials were perceived as less capable than men, with less attractive investment potential.
Behind the Curtain
A look inside private equity firms may provide insight into why bias against top female entrepreneurs is so common. While the Fortune list of the 50 most powerful women in business contains the names of CEOs leading consumer companies like Kraft and Pepsi, only five on the list were in finance and none were working in venture capital. These firms do have female employees, but they're not occupying jobs in the upper echelons, such as partner or CEO. The reality is that many of these firms hire women for accounting financial analysts and other back office positions.
The lack of women in high-powered VC positions undoubtedly has a collateral effect on women looking for financing. The real influence and control rests in the hands of men who run the firms, allocating cash to predominantly male-led companies. As a result, the percentage of women founding new companies is far lower than that of men and their companies tend to be less successful in the long run.
Women Helping Women
The traditional stereotype is that men are more aggressive and willing to take financial risks, but this may be explained by the fact that men support each other with financial backing for new ventures. This also explains why women have historically accounted for only 15% of angel investors.
The Center for Venture Research conducted a study that concluded women are more likely to take risks when other women are involved in the venture. The study found that when fewer women comprise an angel group, they act more cautiously and reflect the stereotype. As the number of women increased, their behavior shifted from risk-averse to more aggressive, as they fed off each other's energy and confidence.
The study analyzed 183 angel groups between 2000 and 2006 and found that groups containing over 10% women invested more heavily and more often. The study also concluded that there are many women with cash to invest in what they believe in, but they often need a push from fellow women to make a financial commitment.
The Bottom Line
There's little doubt that companies controlled by women have a much harder time obtaining financing. This negatively impacts their financial health and viability, severely limiting their ability to effectively compete in a global economy. Resistance in the capital markets also restrains growth and expansion, diminishing employee advancement and creation of new jobs.
In the near-term, women are making inroads by supporting each other and marketing themselves to angel investment groups that include larger numbers of women. Over the long-term, this should have a multiplier effect that increases the speed at which women reach parity with men.