SAN FRANCISCO – Women venture capitalists underperform their male counterparts by some 15 per cent, according to a new Harvard University study, but the performance differences have narrowed over time and in firms that employ more than a single female venture partner.
“We find that female venture capitalists significantly underperform their male colleagues,” wrote Paul Gompers, Vladimir Mukharlyamov and Yuhai Xuan of Harvard and Emily Weisburt of the University of Texas at Austin in their study – Gender Effects in Venture Capital.
They blamed the performance difference in part on a lack of mentoring by the male colleagues. The academics based their study on venture-capital investments made between 1975 and 2003, representing 26,087 investments. Venture investments can take years to reach an outcome, making it difficult to include recent deals.
The authors counted as successful the investments that led to an initial public offering of the company, or 4,622 initial public offerings (IPOs). Only 4.6 per cent of those IPOs had a female venture capital investor, the authors said, concluding that investments made by females were 2.1 per cent less likely to go public.
Holding an IPO marks just one measure of success. Many venture-backed companies are acquired for blockbuster sums, an outcome un-reflected in the study. Venture capital has long struggled with low gender diversity. Women outperformers often credit a male colleague who took them under his wing. That is in line with the study's findings, based in part on interviews with 604 female venture capitalists that lack of contribution from colleagues hurt the women who didn't do well.
“It's not so much male versus female,” said Rebecca Lynn, a highly regarded investor at Canvas Ventures whose portfolio includes financing business Lending Club, valued at $3.8 billion, and others. “It's just getting that coaching.” She praises Gary Little, the partner at Morgenthaler Ventures who brought her into the business, as her mentor.
The authors write that prior careers might affect success, with women venture capitalists less likely to have experience as an entrepreneur, CEO, or product developer. Entrepreneurs admire those careers, perhaps making them more likely to choose venture capitalists with those backgrounds.