There's something to be said for a woman's touch. According to a new study, Women at the Wheel: Do Female Executives Drive Start-Up Success? from Dow Jones VentureSource, hiring more female executives could help a startup company succeed.
The study looked at 15 years of venture-backed company data, and found that the overall median proportion of female executives was 7.1 percent in successful startup companies, compared to 3.1 percent in unsuccessful ones.
Female executives at successful companies tend to hold vice president and director positions. With every 10 percent increase in female executives at the vice president level, the odds of success increase by 6 percent; for every 10 percent increase in female executives at the director level, the odds of success increase by 3.3 percent. However, having a female CEO with all other variables held constant, the odds of success actually fall, according to the study.
“The fact that women's positive impact on startups can be measured with statistical significance was a surprise,” says Maryam Haque, a senior research analyst with Dow Jones Venture Source and a co-author of the study. “Going into the study we knew that it was still uncommon for a company to be founded by a woman or have a female CEO, so it was interesting to see what positions women usually hold. They are most likely vice presidents or work in sales or marketing.”
A successful company was defined as one that went public (or is in IPO registration), is privately held, and is either consistently profitable or has been acquired for an amount greater than its total venture investment. An unsuccessful company was described as still private and independent, but not yet consistently profitable, or has ceased operations, gone bankrupt, or sold at a valuation below their total venture capital funding.
Unfortunately, few startups hire female executives. Of the 168,000 executives at the companies analyzed in the study, less than 7 percent were women. While companies with three or four female executives had a better chance of success than companies with only one or two, a big difference was seen at startups with five or more female executives – 61 percent were successful and only 39 percent failed.
Venture-backed companies have more female executives as they advance, according to the research. Early stage companies often have few employees, at times limited to a CEO and a few high-level executives, and thus less likely to have women on staff. Companies with a higher percentage of female executives tend to be in the financial services and healthcare industries, whereas fewer women are in the energy, utilities and industrial goods and materials industries.