Women in startups face long (but improving) odds
Between 2011 and 2013, only 2.7 percent of US companies that received venture capital funding had a female CEO. But the ranks of women in the tech and startup worlds are swelling, slowly.
| Somerville, Mass.
On a recent Wednesday afternoon, Greentown Labs, a startup incubator located just outside Boston in Somerville, Mass., was a hotbed of activity. It was "pitch day," and investors were on hand to hear presentations from the entrepreneurs growing their startups in the incubator. In the incubator's kitchen, startup founders and investors chatted and mingled, hoping to land that big investment or find that next great idea. Entrepreneurs worked on prototypes of their ideas, from a hydrogen fuel cell charging station to drones that use Big Data to improve crop sustainability, in a machine shop.
Since its founding in 2011, Greentown Labs, which focuses on developing innovations in green technology, has supported more than 103 companies that have created more than 400 jobs, according to its founders. It’s also raised more than $180 million in funding since 2011, with a direct economic output of $182.5 million in 2015.
But very few women have been behind the Greentown Labs startups – just 12 were either co-founded by women or have women on their executive staff.
“It can be hard to be the only woman in the room,” Nicole Homeier, vice president of product at Understory Weather, a company that uses sensors and Big Data to monitor weather events. “I know, I've been there.... but it's not the worst thing and it's important to be there. I like what I do. I make important contributions,” she writes in an email.
Still, the support network available through Greentown Labs has helped Understory Weather grow from a staff of three people in 2014 to almost 14 today. The startup is currently expanding its network of hail and wind data throughout the Midwest.
“Greentown is a lively community,” Dr. Homier says. “Even if you are a [one]-person company, you can come to work here and have a community to bounce [ideas] off of, or just [find] someone to have coffee with.”
As the numbers from Greentown Labs demonstrate, being the only woman in the room is a matter of routine in the startup world. Between 2011 and 2013, only 2.7 percent of US companies that received venture capital funding had a female chief executive officer, according to research completed in September 2014 by the Diana Project at Babson College. In 2016, only 5 percent of the companies on Fortune’s Unicorn List, which includes private companies worth $1 billion or more, have a female CEO, making them perhaps even more elusive than the mythical creatures themselves.
But there are signs that women like Homeier are becoming a more common sight in entrepreneurial circles, and leaders at spaces like Greentown Labs are working to facilitate change.
“The layer of where we are right now is awareness,” says Emily Reichert, Greentown Labs’ chief executive officer. In Massachusetts, she points out, women occupy just 12 percent of positions on company boards. Research from 2020 Women on Boards, an analysis and advocacy group, shows that women held 17.9 percent of board seats on companies included in the 2015 Fortune 1000.
“We’ve not figured out [as a community] how to crack the code on the solving the problem. I think that there are a lot of different ways that we could be approaching that.”
A man’s world
Why are there so few women in startups? The closely knit nature of the tech industry (a hotbed of startup activity), which makes it difficult for outsiders to break in, is one reason. Women make up just 30 percent of the tech industry overall, and that number shrinks as they move up through the ranks.
According to data compiled by Tracy Chou, an engineer at Pinterest, the number of female engineers in tech remains small. The engineering staff at Pinterest is 19.54 percent female. At Mozilla, the company behind the Firefox browser, it’s just 8.6 percent.
“Entrepreneurs rarely look outside of their insular networks, which usually include people who are similar in gender, age, and background, to recruit founding team members,” Elana Feldman, assistant professor of management in the Manning School of Business at University of Massachusetts Lowell, writes in an email.
This contributes to the lack of women on founding teams (who could then gain the experience and social networks necessary to venture out on their own), but it also means that startups miss out on a large pool of talent, Dr. Feldman says.
Women can also lack the initial support to help them break into that world, experts say. “Although women often have mentors who provide professional guidance and personal support, they may not have well-connected sponsors [to] introduce them to strategic contacts,” Feldman says. “This is particularly true in male-dominated domains such as entrepreneurship. Female founders therefore may be less likely to have access to the people and resources that all new companies need in order to be successful.”
When they do reach positions of power and influence in the tech industry, things don’t get much easier. In a survey of more than 200 women in technology and venture capital, 59 percent said they haven’t experienced the same career opportunities as their male colleagues, according to “Elephant in the Valley.” Eighty-eight percent of survey respondents said they have had men address questions to their male colleagues instead of to them, even in instances where they were the more senior employees in the room.
Signs of Progress
However, there are indications that the tech industry is gradually becoming more transparent on diversity.
Even Ellen Pao, a Silicon Valley executive who lost a high-profile discrimination lawsuit against her former employer last year, has acknowledged that circumstances have improved since when she started her career.
“The biggest positive difference over the past 20 years is how women and minorities are sharing others’ bad behavior, data, and their own experiences publicly,” she wrote last fall in Lenny, a newsletter founded by writer and actress Lena Dunham.
In the startup world, too, there are signs that things are beginning to shift. In 2014, 10 percent of US startups that cleared the critical Series A funding round, or the first significant round of venture funding, were founded by women, double the percentage from a year earlier. In Massachusetts, 7 percent of startups in 2014 were founded by women, up from just 2 percent in 2013.
How to help
What’s vital for these women, Dr. Reichert says, are places where all entrepreneurs, regardless of gender, can build their concepts and bounce ideas off each other. At Greentown Labs, that’s especially important, because the engineers and entrepreneurs there are working on building physical examples of their ideas. There are prototypes of a wide range of projects, such including robotic sailboats and technologies that expand the life spans of satellites.
“If there’s anything that companies come here for, it’s that ability to not be alone, that ability to walk in here and feel [the] energy of other entrepreneurs,” Reichert says.
Some, like Abby Speicher, chief executive officer and co-founder of DARTdrones, an FAA-certified drone flight school, find that support through university programs. Ms. Speicher says that her experience at Babson College’s Franklin W. Olin Graduate School of Business provided much of the mentorship she needed to build her startup.
“It’s a lot of people’s dreams to go to Babson and leave with a startup, and a lot of women I know drove it forward while they were there,” she says. “[In Babson’s Summer Venture program] most of the participants were women the year I participated. I also did the Women Innovating Now Lab my second year, a completely female incubator.”
She says that seeing her entrepreneurial goals come to life is one of the most rewarding aspects of founding and running a business.
“It’s always been my dream to be an entrepreneur, so it’s amazing for me to be a part of something that’s really taking off,” Ms. Speicher continues. DARTdrones is expanding ahead of anticipated FAA rule changes that may make it easier for ordinary citizens to fly their drones. “We’re adding new instructors, we’re adding new employees, and it’s amazing to look back and see that we’ve made a lot of progress, and we’re on the right track.”
Yet another challenge facing entrepreneurs like Speicher, relative to men, is a lack of funding. Between 2011 and 2013, only 15 percent of female-owned businesses received venture capital funding, according to the Diana Project. In 2013, the amount of funding that female-owned businesses received during their first and last financing round climbed, to $6 million and $13 million, respectively, yet companies owned by men still received more than 79 percent of total funding during the last investment round.
Even so, research from the Kauffmann Foundation shows that startups with women on their leadership teams actually outperform startups with all-male management, achieving a 35 percent higher return on investments and generating 12 percent higher revenue.
Reichert, at Greentown Labs, says it’s important to create incentives for women to pursue their dreams of founding a startup, even when the message that they’re getting from society may be along the more traditional lines of getting married and settling down.
“[We] also need to think about how [to] incentivize women to take risks,” she says. “If you look at the population of founders at Greentown Labs, you’d see that the prime time for people to build these companies is 20somethings to 30somethings” but women often hear opposing messages at that time in their lives.
“[It’s not] women not wanting to do it.”