VC Management Teams: Gender Gap Explained

Several months ago I wrote a blog about the lack of female partners in the venture capital firms. There I mentioned that only 25% of the venture capital companies have a single woman partner and just 7-8% of the total VC firms have more than one female partner.

According to a Bloomberg Businessweek article, the gender inequality is apparent on the other side of the investment table as well. The article quoted the Center for Women’s Business Research, according to which about 41% of all private U.S. companies are owned by women. However, only 3-5% percent of those have received venture capital investment. It seems that the correlation between the low number of female VC partners and female owned businesses that receive venture funding also implies causation. To prove this, another Businessweek article pointed out that VCs with female partners are 70% more likely to invest in female-owned business than VCs with no female partners.

Although the results of these surveys do not specify the industry concentration or the funding needs of the female-owned businesses, I believe it is safe to say that a lot of those are undervalued and passed on by investors. Naturally, this creates an inefficiency in the market that will prove very profitable for the VC firms that do not suffer from the gender bias.