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Women senior executives of venture-backed companies are more likely to succeed than companies where only males are in charge, according to new research from Dow Jones.
The report, “Women at the Wheel,” does not speculate on why female executives improve a company’s chance of success, nor did it study companies where only females are involved.
But it finds that companies have a greater chance of either going public, operating profitably or being sold for more money than they’ve raised when they have females acting as founders, board members, C-level officers, vice presidents and/or directors. At successful companies, the median proportion of female executives was 7.1%; at unsuccessful companies, 3.1%.
The report followed 20,194 U.S.-based companies in the Dow Jones VentureSource database that either received funding or exited between 1997 and 2011. Of the 167,556 executives involved, about 7% were female.
Attitudes about women are changing rapidly in the technology industry, where female participation continues to increase. This year, while two Bay Area investment firms (Kleiner Perkins Caufield & Byers and Pantheon Ventures) were sued by women for gender discrimination, the board of Yahoo Inc. named a pregnant Marissa Mayer as the company’s president and CEO.
Very few companies in the report–only 1.3%–had a female founder, but companies tend to hire more women as they grow: 6.5% of companies had a female CEO, and 20% had one or more female C-level executives, most commonly in sales and marketing roles.
“I continue to be surprised that there aren’t more venture-backed companies with women CEOs,” said Cameron Lester, a general partner at Azure Capital Partners. Azure has invested in several women-led companies, including VMware Inc., a software virtualization company that sold to EMC Corp. in 2003 for $635 million and later went public.
Women face bias in the tech industry, Mr. Lester said–investors “tend to go with what they know” and are more likely to back a company when it’s run by someone who fits the typical entrepreneur profile, such as a young, male computer scientist who’s graduated from Stanford University and worked at a hot company like Google Inc. or Facebook Inc.
Azure, which was founded by former Wall Street analysts, tries to avoid such bias by basing its investments on research. Also, female tech executives tend to be better on average than their male counterparts because they’ve survived the industry’s “natural selection,” he said.
Any kind of diversity is good for a company because it brings in different points of view when decisions have to be made, said Theresia Gouw Ranzetta, a partner at Accel Partners and one of Silicon Valley’s few female venture capitalists.
Women, for instance, are more likely than men to think of different types of customers for a company to target or different ways to sell to them, she said, since “women are not the target customer in Silicon Valley for highly technical services. They think more out of the box.”
Women also tend to be more conservative than men, which is both good and bad. Financially, they may raise less money than men, which makes them more capital-efficient, but they’re also more likely to sell a company when they get a good offer, rather than to keep it independent or take it public for a bigger success down the road, according to Ms. Ranzetta.
“There are not enough women CEOs and executives taking companies public,” she said.
Personally, women tend to be more careful about business decisions, and that’s not always good either, according to Damballa Inc. Chief Executive Val Rahmani, who joined the security company in 2009 after 18 years as an executive at International Business Machines Corp.
Women may think very carefully before making a business decision, she said, “whereas a lot of guys have a ‘What the hell, let’s give it a go’ attitude” that can be useful when companies need to move quickly.
But women are also more concerned about the emotional well-being of their team. Although she can be tough and mean when people aren’t delivering, “we run more as a family (at Damballa),” Ms. Rahmani said. “I would love for everybody on my team to be happy.”
Ms. Rahmani urges the women who work for her not to try to disguise their looks by wearing “frumpy” clothes to work. She also encourages women to study more math and ignore the mysticism that surrounds tech start-ups.
“Venture capitalists are smart folks, but at the end of the day, they’re just people wanting to invest in something good,” she said.
