Women Entrepreneurs Aren’t Getting Funded. Can B-Schools Help?

Babson College

A new report authored by professors at Babson College shows that even as women are getting closer to parity in representation at the highest levels of business in the United States, women entrepreneurs struggle to secure financial backing, and new models of funding are needed to address the problem.

The Diana International Impact Report, released by Babson’s  Center for Women’s Entrepreneurial Leadership, shows that even as entrepreneurial women have become a significant force in the U.S. economy — with equal or majority ownership in 45% of all U.S. firms — most have difficulty raising growth capital. Further, less than 15% of all VC-funded businesses have a woman on the team, and less than 3% of all VC-funded companies have a woman CEO.

In fact, more than 92% of all investors are male, according to the most recent research from the Diana Project, an initiative of Babson’s Diana International Research Institute.

Addressing the problem requires the creation and identification of — and support for — new models of funding for women entrepreneurs “because their access to growth capital is a serious and continuing problem,” says study author Candida Brush, Babson vice provost of global entrepreneurial leadership. Her co-author, Babson Entrepreneurship Professor Emerita Patricia Greene, adds: “Investing in women entrepreneurs is an opportunity to expand innovation and economic development. We should create a new reality for the process and benefits of investing in women entrepreneurs.”


Babson College Entrepreneurship Professor Emerita Patricia Greene, co-author of the new Diana International Impact Report. Babson photo

The Diana Report, sponsored by the Center for Women’s Entrepreneurial Leadership (CWEL) at Babson College, advocates identifying disruptive funding models and best practices for women entrepreneurs across each of the six primary processes that drive entrepreneurial development: identifying, training, connecting and sustaining, funding, enabling public policy, and celebrating. But more can be done at the education level, says Elissa Sangster, CEO of the Forté Foundation, a nonprofit focused on women’s advancement and gender parity in business school and the corporate world.

Sangster says B-schools can help, in part by what they already are doing.

“Business schools need to continue to teach that being successful these days means building an organization that is thinking about the future — a future that is inclusive of women and minorities,” Sangster tells Poets&Quants. “This includes case studies, which is an area in need of improvement.”

Greene, a former director of the Women’s Bureau at the U.S. Department of Labor, says B-schools can help in three key ways.

“First, by convenings such as the Diana International Impact Day, that brought together academics, practitioners, and policymakers, and driving the discussion beyond the numbers to focus on solutions, those things currently being tested and those things that we could test in the near-term future,” she tells P&Q. “Second, to do that, you do need the numbers, and business schools can make that difference by supporting rigorous research — basically asking the really difficult questions and finding objective ways to get answers.

“And third, business schools can make a difference through their curricular and extracurricular activities to ensure that the next generations of business leaders have the knowledge they need to move from archaic business practices to create a better world of business — ways of doing business within businesses and across businesses — for all participants.”

Sangster, a former assistant dean and director of the MBA program at the University of Texas-Austin McCombs School of Business, says the struggles of women entrepreneurs are shared by women at all levels of business and business education.

“An abysmal dearth of VC funding for women is basically the same sad story as the lack of diversity on corporate boards and in senior leadership,” she says. “It’s not just a diversity and inclusion issue, it’s a business and economic growth issue, as countless studies have linked diversity to stronger financial performance. Your company’s leadership team should be diverse from the beginning. If it isn’t, your success will be limited.

“If you concentrate all of the power and money with male decision-makers, gender equity will most likely not occur naturally. If 92% of the VCs are men, they are unlikely to fund women entrepreneurs without pressure from a stronger influence, like banks and pension funds, who are increasingly looking at corporate diversity to ensure they get a good return on their investment. I think this is why you are starting to see companies like Goldman Sachs taking steps to close the funding gap for women with their $500 million commitment to invest in and support women-led companies — and their announcement at the World Economic Forum this month by CEO David Solomon that the bank would refuse to take a company public unless it had at least one diverse board member.”

The Diana Project


The Diana Report, developed during the June 2019 Diana International Impact Day event hosted by Babson College, calls for refinement of the pipeline processes that already exist and the creation of new models for funding for women entrepreneurs that differ from conventional VC models. Among its proposed solutions:

• Train women investors as a way to open the funding tap to allow a new flow of capital into women-owned and -led businesses and a growing number of companies. Examples of training vehicles are 500 Startups, which offers VC Unlocked as an executive education program for those who want to learn “how Silicon Valley really works”; and 37 Angels, which is building a community of women investors with a mission of educating early-stage investors.

• Launch more accelerators focused on women founders to provide opportunities for female entrepreneurs to access resources, including their networks. Approximately 30 women-focused start-up accelerators and incubators in the U.S. currently provide training, support, and funding, including the Women Innovating Now (WIN) Lab at Babson, Aviatra, Founders for Change, The Riveter, and The Wing.

• Venture capital firms need to hire more female decision-making investors, and new funds must grow a more inclusive focus on both the supply and demand side, so that more women provide the funds and more women receive them. This would effectively expand the number of women investing and diversify the types of businesses selected for investments; examples include Victress Capital, XFactor Ventures, Portfolia, Golden Seeds Venture Fund, and Plum Alley.

• Greater effort is needed from advocacy organizations, including the National Women’s Business Council, to catalyze new ideas, encourage change, and provide policy support to address diversity, start-up, growth, and funding of high-growth women entrepreneurs.

• It is important to celebrate, advocate, and provide visibility for accomplished women entrepreneurs, funding successes, and outstanding performance. “Storytelling,” according to the Diana Report, “becomes a vehicle for creating role models and giving women confidence and permission to grow and scale. One such initiative includes collaborations between Estee Lauder Companies, Nordstrom, UGG, and Williams-Sonoma Inc., which are realizing the power of partnerships by coming together to raise the profile of women leaders across global supply chains through the ‘This is a Leader’ campaign, coordinated by Business for Social Responsibility’s HERProject. The Tory Burch Foundation is also a major catalyst in amplifying the visibility of women entrepreneurs through its Embrace Ambition series and corresponding Ambition Stories campaign.”


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