Addressing the Dearth of Female Entrepreneurs

I'll bet that if Apple Chief Executive Steve Jobs had even one woman on his executive team, the iPad would have been given a different name. Otherwise why would Apple (AAPL) give its new device a name half of the population equates with feminine hygiene?

Apple isn't the only company with a male-dominated executive team. No woman has ever been CEO of a Wall Street firm. Women were primary owners of only 19% of the 237,843 firms founded in 2004, according to the Kauffman Foundation's analysis of Dun & Bradstreet data. And only 3% of tech firms were founded by women in that year.

"Women are under-represented in all aspects of information technology, and IT entrepreneurship is no exception," says Lucinda M. Sanders, CEO of the National Center for Women & Information Technology (NCWIT). Women are "almost absent in high-level technology positions," such as chief technology officer and vice-president of research and development, Sanders says. Women hold less than 5% of all IT patents and contribute less than 1.2% of open-source software, she says.

Comparing Female and Male Entrepreneurs

To get a better understanding of why women are so poorly represented in tech and other high-growth businesses, I asked NCWIT to help me analyze data on the background and motivations of 549 successful entrepreneurs surveyed by my academic team. We determined that 8% of our sample was female.

Female and male entrepreneurs differ in some subtle ways, we learned. Women were more motivated by a business partner who encouraged them. Women also relied on business partners as a main source of funds more often than men. And the average female entrepreneur rated prior experiences as more important than the average man rated his, with regard to the success of their current startups. Women put a higher value on their professional/business networks. Finally, women were more cautious and expressed more concern about protecting their company's intellectual capital. On the other hand, financial pressure to keep a steady job was more acutely felt by men than women. That's understandable considering that men still make a lot more than women on average and are still more likely to be the primary breadwinner.

Yet, men and women entrepreneurs are similar in many respects, the results show. They had equivalent levels of education, the same early interest in starting their own business, and similar other advantages, including work experience, access to financing, and lessons learned from prior successes and failures. It seems that men and women found successful enterprises under many of the same conditions.

Men and women also had similar motivations to launch a business. They shared the desire to build wealth and capitalize on business ideas. Both were drawn by the appeal of the startup culture and always wanted their own company. Neither wanted to work for someone else.

Societal Failure

Given all the similarities in background and motivation for men and women entrepreneurs—and the fact that women now outnumber men in universities—we remain perplexed by the dearth of female startup executives.

Evidence suggests that this does not reflect a failure on the part of women but rather a societal failure. Consider the contrast with India, a country that is in many respects more conservative than the U.S. It might therefore be expected to be even less amenable to women in leadership. Yet there, women are rapidly rising through the top ranks of the business community. Indian divisions of some of the world's foremost financial institutions, including HSBC (HBC), JPMorgan Chase (JPM), Royal Bank of Scotland (RBS), UBS (UBS), and Fidelity International are run by women, Heather Timmons of The New York Times points out. "Half of the deputy governors at the Reserve Bank of India are women," she writes.

India's finance industry is newer, and women there may contend with fewer entrenched players, says Cindy Padnos, managing director of Illuminate Ventures, who has been researching the role of women in high tech.

Padnos is optimistic that the tide will turn in the U.S. as more people recognize that having women at the helm makes good business sense. Women-led high-tech startups generate higher revenues per dollar of invested capital and have lower failure rates than those led by men, her research shows. Women are also more capital-efficient; the average venture-backed tech company run by a woman was started with one-third less committed capital than those led by men, yet achieved comparable early revenue levels.

Support Networks

More cause for hope: Women in technology have begun forming their own support networks and groups, including Women 2.0 and the Young Women Social Entrepreneurs.

But much more needs to be done to encourage talented women to pursue tech entrepreneurship. "If we want more women starting these companies, let's encourage them, invite them into new partnerships, and support them financially," Sanders says. "This is a critical innovation imperative for our country and our world; women have compelling technical ideas to contribute, and we can't afford the deafening silence their noncontribution creates."

I concur wholeheartedly, and hope that when I revisit this topic in subsequent years the percentage of women launching IT companies rivals the percentage of women going into law, medicine, and higher education. The outcome would benefit us all.

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