Ann Arbor has one of the highest rates of women-founded, venture-backed startups in the United States.
That was one of the surprising findings of a recent report from the Center for American Entrepreneurship (CAE) and the National Center for Women and Information Technology (NCWIT). CAE research director Ian Hathaway authored the report, titled The Ascent of Women-Founded Venture-Backed Startups in the United States.
While other reports look at total deals or total dollars invested, Hathaway's study focused on the number of new companies entering the venture-backed startup "pipeline" each year by tracking the startups' first venture investments.
In 2017, 16 percent of the nearly $83 billion invested in U.S. venture-backed startups went to companies with at least one female founder, and just 2.5 percent went to startups with all-female founders. In addition, it's estimated that only 9 percent of general partners who make investment decisions at U.S. venture capital firms are women.
However, looking at those "pipeline" figures shows an encouraging trend, Hathaway says.
"If you look at the flow of companies entering (the pipeline), it's 21 percent (women-founded), so that means the pipeline is stronger than the overall headline numbers," he says.
Ann Arbor was at the top of all the metro areas examined in terms of women-founded, venture-backed companies, at 29 percent.
Hathaway says he's not entirely sure why, but he thinks several factors play a role. First, communities that are more socially and culturally progressive tend to have higher numbers of women-founded firms. Additionally, healthcare and biosciences industries tend to have more women-founded companies, and the biosciences are strong in the greater Ann Arbor area.
Additionally, there's a positive correlation in most metro areas between the rate of startup growth and the percentage of women-founded companies, with San Jose in Silicon Valley being one of the few exceptions to that rule, Hathaway says.
Hathaway says a lack of women in venture capital firms means that fewer women-founded companies get funded, even though women-led firms perform just as well as other companies. The decision to invest in a company for venture capitalists is very high-risk, and sociological studies have shown that people revert to what they're comfortable with when there are high-stakes decisions to be made, Hathaway says.
"The fastest way to move the needle is to have more women in the room making investment decisions," Hathaway says.
Other strategies that encourage more gender equity in this arena include women-specific mentoring and education, peer support groups for women entrepreneurs, and women-only business clubs, Hathaway says.
"The venture capital industry and the high-tech startups they fund have not been well populated
by women for a very long time," Hathaway says. "That is beginning to change, but there's a very long way to go, and it will take time."
The full report is available here.
Sarah Rigg is a freelance writer and editor in Ypsilanti Township and the project manager of On the Ground Ypsilanti. She has served as innovation and jobs/development news writer for Concentrate since early 2017 and is an occasional contributor to Driven. You may reach her at firstname.lastname@example.org.