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Positive Signs Remain for Women-led Companies, Despite Funding Disadvantage

June 14, 2004

Although a significant gap still exists between women-led companies and their male counterparts, in terms of venture funding, some promising news may suggest a change in fortune for the former, a study released today by Growthink Research of Los Angeles and Chicago-based re:invention Inc. shows.

The 400-page study, Venture Funding for Women Entrepreneurs, provides a detailed profile of women-led, venture capital (VC)-funded, privately-held business enterprises and companies with women executives. The report is based on a comprehensive analysis of 1,860 companies that raised more than $19 billion of venture capital in 2003.

Among major findings, 84 women-led companies in the U.S. received $783.8 million in VC -- 4.5 percent of all funded firms and 4.2 percent of all venture dollars. Thirty-seven of the 84 companies (44 percent) were in the healthcare sector, which accounted for more than half ($427.7 million) of the total funding raised by women. Additionally, 25 companies (30 percent) in the business software and services sector raised $165.3 million, followed by 12 women-led companies (14 percent) in the connectivity sector raising a total of $130.1 million.

In comparison, 60 percent of all male-led funded firms fell into the connectivity and business software and services sectors, with only 24 percent categorized as healthcare firms. The biggest gap between male-led and women-led funded companies occurred within the connectivity and healthcare sectors.

"The disparity in funding between ventures led by males and females continues, but there are several areas of note in which women-led companies are performing better than others," said author Corey Lavinsky of Growthink Research, a leading VC research firm. "Leading the pack are women-led biotechnology and pharmaceutical companies which collectively raised $289 million. Further, women-led companies in the fields of HR software, e-mail/messaging software, and imaging technologies all raised more than 10 percent of the total dollars invested in their particular fields."

Other findings include:

  • Only 217 investors provided venture capital to privately held women-led companies in 2003. Eight VC firms invested in three or more women-led firms.
  • More than one-third of the funding went to ventures in the Bay Area, which also leads male-led company VC investments. The Bay Area and Boston accounted for more than 59 percent of the funding for women-led ventures. The northeast states of New York, New Jersey and Pennsylvania collectively accounted for a distant third, 7.4 percent. And,
  • More than 45 percent of women-led funded companies employed women in management positions. More than 1,150 VC-funded companies headed by male CEOs did not employ any women executives.

Venture Funding for Women Entrepreneurs is the first comprehensive report to explore the women-led business share of deals and dollars in four years. The Wells Fargo-sponsored Women Entrepreneurs in the Equity Capital Markets: The New Frontier study conducted in 2000 estimated that women-owned firms represented 9 percent of investment deals and 2.3 percent of dollars.

More recently, a March 2004 study funded by the Kauffman Foundation found the VC industry was dominated by males and attributed the lack of women decision-makers and limited network connections to fueling the female entrepreneur funding gap. The research was based on data from 1995 to 2000.

"Instead of bemoaning findings in this new report as yet another blow to women, we should be asking what can we do and where do we go from here?" said Kirsten Osolind, chief executive officer of re:invention, a marketing consulting company dedicated to women-led businesses and study sponsor. "We need to cultivate programs that help venture capitalists scale their business models and identify new high potential women entrepreneurs, as well as encourage, support, and promote visibility of women entrepreneurs in their attempts to stand out when raising startup capital."

Venture Funding for Women Entrepreneurs is available for purchase from Growthink Research at http://www.growthinkresearch.com.