Dear Mr. President:
“It has been the risk-takers, the doers, the makers of things who have carried us up the long rugged path towards prosperity.” We agree and celebrate your support for the American entrepreneur – the backbone of the economy. We applaud the creation of the Economic Recovery Advisory Board, and we write to you today asking that the Board ensures that the policies and programs it implements include high-growth companies founded and led by women.
The economic challenges we face cannot be solved without the true participation of women in the very heart of innovation – leading start-ups with the potential for high-growth and requiring the backing of venture capital. Women are now, more than ever, poised to embrace economic opportunity. Their exceptional pedigrees represent the decades of educational and cultural changes that have encouraged women to pursue advanced studies, then careers in the sciences, engineering, medicine and business. As these women assume the risks and opportunity of entrepreneurship to build and lead high-growth companies in the very sectors that can accelerate our nation’s economic recovery, we must remove barriers to their success. These entrepreneurs are extraordinary innovators. They are prepared to create jobs that provide prosperity. They need access to the networks that provide capital, mentorship and a clear map to success.
We believe this is an opportunity for your administration to use the stimulus plan for economic and social progress by 2015.
Mr. President, consider this: the roughly 23,500 U.S. companies that received venture capital between 1970 and 2005 accounted for 10 million jobs and $2.1 trillion in revenues in 2005, according to a study conducted by Global Insight, a leading economic analysis and forecasting firm. These numbers represent 9 percent of the total American private sector workforce and 16.6 percent of total U.S. GDP, according to the study.
However, of the venture-backed companies in this same period, fewer than 5 percent had a woman CEO and only 7 percent had a woman in a founder role. By 2007, these numbers had dropped to 3 percent and 5 percent respectively.
These figures are particularly startling when contrasted with the Minority Business Development Agency research that shows that between 1997 and 2002, the number of women-owned businesses in this country grew at twice the rate of all firms. The research also found that women have been responsible for starting over 50% of all new businesses.
The percent of companies founded and led by women that receive venture capital must increase. Women are a resource, that if tapped for their existing educational, professional, and innovative backgrounds and capabilities, have the ability to dramatically improve the state of the American economy now and long into the future.
Now is the time to pay attention to the economic role of venture capital, and who has access to that capital. Despite bleak economic forecasts, the market for innovative start-ups remains viable, as venture capital funds by their very nature focus on a long-term horizon. Relatively unscathed by the current credit crisis, many venture capitalists still have access to capital that could fund and grow the next wave of start-ups. Yet research shows their investment strategies and networks fail to include women.
As investors, entrepreneurs, industry leaders, researchers, and scientists we have dedicated ourselves to investing in entrepreneurship and innovation in an inclusive manner. We welcome, with hope and anticipation, your shared commitment to this vision – that women can fully participate in high-growth markets and partake of American prosperity.
We look to the Economic Recovery Advisory Board to set clear policies that will encourage the inclusion of women in all aspects of the process of investing in innovation. Specific recommendations include:
- Direct government funding to research why women are not accessing venture capital to build high growth businesses at percentages consistent with their participation in entrepreneurship. And continue to fund innovative programs that address the root causes.
- Encourage Limited Partner investors such as government pension funds to advocate for including women – not only in the portfolio of companies of these investment firms, but also in the general partner teams they select to make those investments. The data shows that venture firms with a woman as a partner are 75 percent more likely to have a woman-led business in their portfolio. The lack of investment in women entrepreneurs parallels the declining numbers of women partners in venture capital firms – which rests at less than 7 percent today and is even lower in other areas of private equity.
- Require the Small Business Administration (SBA) and the Small Business Investment Company (SBIC) to revise the women owned business rules to include venture backed start-ups. Currently, the requirement is that a woman must own at least 51 percent of a company to participate in the SBA and SBIC programs. Because raising venture capital results in changes in ownership positions for the founders and executives, this requirement excludes from SBA and SBIC programs the companies with women founders or leaders who have raised venture capital and whose ownership stakes have moved below 51 percent.
- Reinstitute SBA programs offering matching funds for new or emerging manager venture capital firms focusing on underserved segments of the market, including women-led or founded start-ups. These programs allow new venture capital firms to be launched with more financial stability resulting in an increased likelihood of successful outcomes, both for the new venture capital firms and for the companies in which they invest.
We believe only bold, brave actions will make the high growth, venture capital model inclusive of women.
Mr. President, thank you for your dedication to change, for accepting responsibility in a very difficult time, and for considering this request.
Sharon Vosmek, CEO