Menu
Financial events
Educating About Poverty Through Frugal Living
The Costliest Diseases In America
Why You Should Be Wary Of Target-Date Funds
How To Get Your First Credit Card
How To Avoid Becoming A Fraud Victim
Do You Need Dental Coverage?
Investopedia Staff's Fatherly Financial Advice
3 Reasons Why Women Will Lead The Economic Recovery
What If Social Security Disability Runs Out Of Money?
Who Should Pay For College?
7 Companies With Big Advertising Budgets
Good For Facebook, Bad For Google And Apple
Is Extreme Couponing Going Extinct?
How Inflation Has Affected Transportation Prices
How Teens Can Stay Safe At Work
How To Dress For Success In Business
Financial Preparation For Deployment
5 Cheap Ways To Increase Happiness
Fastest Growing Small Business Sectors
The True Value Of A Staycation
Is It Better To Be Book Smart Or Street Smart?
Unemployment Benefit Changes Coming Soon
7 Affordable Ways To Buy Happiness
5 Big Companies That Have Cut Out Pension Plans
Investors Unsure Of Female-Owned Companies
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.

Print
How To Manage Your Company Stock
Protecting The Elderly From Scams
Most Popular Outsourced Jobs
Best Credit Card Features For Students
Easy Certifications To Add To Your Resume
Car Maintenance Tips That Help You Save Money
10 Twitter Feeds Investors Should Follow
Must-Have Software For The Home Office
5 Easy Ways To Expand Your Vacation Budget
The Pareto Principle And Savings
The 8 Most Volatile Sectors
Saving Money On Individual Health Insurance Policies
Cheap Ways To Keep Cool This Summer
Bookkeeping 101 For Advisors
What Happens When Your Credit Card Expires
Facts You Didn't Know About Private Student Loans
How Women Can Improve Their Financial Standings
3 Scenarios Where Downsizing Your Home Is Smart
How Families Can Survive With Just One Income
Tax Rules For Renting Out Your Vacation Home
Most Effective Charitable Organizations
The Worth Of Stay-At-Home Parents
Most Successful Movie Reboots
Why Making Minimum Payments Gets You Nowhere
Which Tablet Should You Buy?
The Hidden Costs Of Self-Employment
Microsoft Vs. Apple
6 Common Advertising Phrases To Be Wary Of
Menu
10 States With High Sales Taxes
5 Costly Sports Contracts That Didn't Work
Worst Case Scenario For Credit Card Debt
How To Plan An Affordable Fourth Of July Party
Best Places In The U.S. To Buy A Summer Home
Retirement Tips For Single-Income Homes
Life Insurance Policies For Stay-At-Home Moms
5 Top-Paying Intern Positions
Investors Unsure Of Female-Owned Companies
The Most Financially Literate Countries
What Will The Maximum Retirement Age Be?
5 Ways To Invest $5,000
5 Reasons To Build A Web Presence
The Most Costly Olympic Games
The Financial Factors Behind Population Decline
Should Having A Private Pension Be Made Mandatory?
5 Steps To Qualify For A Mortgage If You're Self-Employed
Unique Wedding Registries
How To Invest In Corporate Bonds
5 Things To Consider Before Relocating For Work
6 Unlikely Rivals That Should Merge
Personal Finance And The Election
Jobs That Can't Be Outsourced
5 Economic Reports You Should Watch