Why Are There So Few Women Tech Entrepreneurs?

By Deb Perelman  |  Posted 2008-05-15

Why Are There So Few Women Tech Entrepreneurs?

In a March 26 report, BusinessWeek showcased the best young entrepreneurs in tech, all aged 30 and under and considered the "most likely to shape the world's digital future." Of the 45 entrepreneurs, only three were women.

Yet according to the Center for Women's Business Research, women are strongly represented among entrepreneurs, launching 55 percent of new startups. It is only in technology that they are under represented. According to the Bureau of Labor Statistics, women represent less than 26 percent of the IT work force, and start fewer than five percent of new IT companies.

A NCWIT (National Center for Women & Information Technology) literature review on entrepreneurs and gender found no conclusive evidence that gender was a factor in the success of entrepreneurs.

However, when it did influence success, it was more likely to be due to gender differences in education, experience, ability to build effective business networks and access to financing.

Just how significantly can networks, mentors and a seat at the venture capital table affect women's chances of launching successful technology endeavors? Those in the field feel that is it quite a bit.

One theory that attempts to account for the small number of women in tech entrepreneurship suggests that it is a reflection of the low participation of women in IT in general.

Women hold 51 percent of professional jobs in the United States, yet they comprise only 26 percent of the IT work force. Furthermore, far fewer women worked in IT in 2008 than did in 2000, down 76,000 according to an analysis of Bureau of Labor Statistics data.

Though only 13 percent of Fortune 500 technology companies have women corporate officers, according to NCWIT, their under-representation begins long before the boardroom. Girls accounted for just 15 percent of Advanced Placement computer-science exam takers in 2006-the lowest female representation of any AP exam.

While the number of men studying computers began to edge back up after taking a hit in the years following the dot-com bust, the numbers suggest that most women never returned. They earned only 19 percent of all computer science degrees in 2007, down from a peak of 37 percent in 1984.

Rebecca Mercuri, president and chief technology officer of Notable Software, a consulting firm that specializes in computer forensics, points to the especially low number of women at the Ph.D level of computer science, arguing that this number is connected to women's entrepreneurship because more often than not, it is Ph.D-level individuals who are launching new companies.

"The diminished pipeline affects entrepreneurship. These Ph.Ds are often the idea people, the people writing grants, holding the kinds of jobs needed to get a company kick off. In certain aspects of the field, it does help to land certain types of contracts," Mercuri told eWEEK.

Many women turn to business creation out of a need to shape their own career paths because a traditional corporate environment may not allow them to move at a pace that feels right for them.

A Tendency for Businesses to Stay Small

"One of the biggest challenges for women in corporate settings is that the traditional business paradigm doesn't take into consideration the many nuances that affect a women's life. You're forced to choose between being on the fast-track and getting everything you need or taking care of your family. You're either on the fast-track or you're not," Susan Solovic, author of the Girls' Guide to Building a Million-Dollar Business and co-founder of SBTV.com, a video news network for small business, told eWEEK.

"Women entrepreneurs are saying 'I want to do it my way.' It's not that they want to work fewer hours but hours that are more conducive to their lives."

This theory reasons that if fewer women are working in technology, fewer will be starting new-technology ventures.

Yet women's participation level in tech entrepreneurship-at 4.3 percent, according to Dow Jones VentureSource-is significantly lower than their representation in the field-at 26 percent. This makes many observers feel that there's more than just a lack of interest in technology keeping women from participating in business creation.

Several facets of successful business creation suggest that differing experiences of men and women, compounded with an under representation in the technology sector, might better account for their starkly low numbers.

A tendency for businesses to stay small

One of the most notable differences between small businesses launched by women and men is that those in the former group are statistically more likely to stay small. 

"Fewer than 800,000 of women-owned small business ever cross the $250,000 mark. They tend to stay small and not get to the next level. I think the mass media perceives these women-owned businesses as cottages-teeny tiny," said Solovic.

Solovic said that she finds that a lot of women are afraid to say that they want to build a big business or that they see their venture as having the potential for substantial growth. Instead, women are more likely to play it down or speak of it as a side effort.

"It is important enough to say it out loud so that others can invest in that vision or dream. They'll say that they want to build a little business that can supplement the family income, and there's nothing wrong with that-as long as you do it from an educated point of view, and know what your options are," said Solovic. 

Lack of access to networks

Sharon Vosmek, CEO of Astia, a non-profit organization that works to accelerate the funding and growth of women-led startups, said that she's recently seen a lot of interest by women in moving into high-growth companies, but they're struggling on multiple levels, the first of which is the lack of a set of connections.

"Women tend not to have the same networks as their male counterparts do, and even when they have them, they access them differently. Men do very well at doing business with their friends and colleagues. Women need to build those same strong business networks," said Vosmek.

Vosmek is one of many who have pointed to the role of a lack of access to the "in networks," such as the angel investors of the business world-in creating an extra-steep uphill climb for would-be women entrepreneurs. Solovic explained that networks are more than business connections-they are individuals that feel that they will work well together.

"People do business with people they know and feel comfortable with. It tends to be a male-dominated industry, because men have done a better job of networking within it. They've usually taken time to get to know people in the lending area, so when they need outside capital, they already know who to call," said Solovic. 

A Need for Mentors

A need for mentors

Mentors, those that work as expertise-sharing counselors to women looking to launch their own ventures, have also been both correlated with successful entrepreneurial endeavors and a challenge for women who can't find them.

"Women tend not to have as many mentors, because there are fewer women out there running technology companies," said Mercuri.

Women who have mentors they can turn to for guidance have said that these relationships were a big part of their early success-one more way that successful women entrepreneurs inspired more in the field.

This is something that stands to improve over time-should more women join the ranks of entrepreneurs.

"Most haven't seen a whole lot of women before them succeeding in this, and this is especially true for the 30- and 40-somethings. However, the 20-something age group we've talked to are fearless about pursuing venture capital, and they've had a lot more people before them-such as their own mothers-modeling that success," said Vosmek.

Some feel that a lack of women already in technology businesses becomes a self-fulfilling prophecy, thereby prohibiting the recognition of new ones that want to join.

"My theory is that because we're underrepresented in tech in general, there are fewer of us launching IT companies. Also, there probably is some hiring bias. I know that sometimes my company gets overlooked in favor of a male company. Tech folks tend to dismiss women as lightweights even though we're not," said Mercuri.

The data backs this up, showing that having women already at the table helps get more women to it. 

Fewer female venture capitalists at the table

Myra Hart, a retired Harvard professor of management practice, found in a 2002 report that was part of The Diana Project, a larger research effort about women entrepreneurs, that although women's participation in new-venture creation had been at an all-time high for over a decade, they'd received a disproportionately low amount of the venture capital available in the United States.  

"They found that venture firms that had women at the partner level were significantly more likely to have women-owned businesses in their portfolio. Having a woman at the table changed the dynamics but it wasn't the women bringing it. The men were more used to having women as peers," said Vosmek.

The Diana Project also found there was low participation. In 2000, women represented only nine percent of management-track venture capitalists, as well as high turnover among female-venture capitalists.

Sixty-four percent of the women in the venture capitalist industry in 1995 were no longer in it in 2000. Because of the high turnover, the report concluded that few women gained the experience needed to make it to the partner level, and the entrepreneurs had fewer first-degree connections with the 'gatekeepers' (mostly men) who would hire them.

So Where are the Women Tech Entrepreneurs?

Andrea Henderson, who is working with Hart at the Clayman Institute for Gender Research at Stanford University to update the Diana Project research in a post dot-com bust era, feels that women entrepreneurs were especially hard hit by the tech market crash of 2001. 

At the height of the dot-com boom in 2000, women accounted for seven percent of tech entrepreneurs, a number which currently hovers around four percent.

"The dot-com boom was a chance for new players to enter the field. So when the market crashed, those with the longest track records and history of successes got back on their feet the fastest," said Henderson.

During the boom, there were more women tech entrepreneurs than ever before, but many of them didn't seek new endeavors when venture capitalists were reinvesting in tech companies. Little research has been done to take a look at why most women didn't return.

"If it was your first time out and the bust happened before you had a chance to be successful, you may not have had a chance to come back," said Henderson.

The impact of the dot-com bust on women is especially visible within the ranks of serially-successful entrepreneurs where women are almost completely absent.

"BoardRoom Magazine found a while back that there are very few serially-successful female entrepreneurs. Men are more likely to come back after a failed venture. The message that you can still have success after a business failure isn't getting to women," said Vosmek.

So where are the women tech entrepreneurs?

Can all of these facets which slow the progress of all businesses created by women-the tendency to stay small, a lack of networks, fewer mentors, smaller presence at the venture capital table and a higher dropout rate after the dot-com bust fully account for the drastically low number of technology businesses started by women?

Some argue that these theories are a good start but not the whole answer.

"There are lots of reasons thrown out there as to why fewer people are investing in women's ventures. Some suggest that women don't have the necessary education or experience, that they aren't high risk-takers or that many wish to be the sole controller of their businesses and not take on partners. But none of these reasons are enough to explain the shockingly low participation of women in tech entrepreneurship-less than five percent," said Henderson.

One promising sign is that quite often, as soon as the dynamics that tend to weigh against women entrepreneurs are brought to their attention, they change almost immediately.

"We work with women to address the network issue and connect them with serial entrepreneurs. We believe that we can shortcut some of their pathways with the been-there, done-that experts," said Vosmek, who said that Astia has a greater than 60 percent success rate with the companies with whom they consult.

Yet, as exemplified by the BusinessWeek article, the prevailing image of a tech entrepreneur is still a young, scrappy guy like Mark Zuckerberg of Facebook or Kevin Rose of Digg.com. And it is those faces that are mainly seen seated around most venture capital tables.

"Change will really happen when we see higher numbers of women at the venture-capitalist level," said Vosmek.



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