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Start-ups with more female executives do best, study says

Sunday, October 14, 2012  
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A start-up company’s odds for success increase with more female executives at the vice president and director levels, according to a new study by Dow Jones.

Sixty-one percent of start-ups with five or more females at these levels were successful, 39 percent failed, according to "Women at the Wheel: Do Female Executives Drive Start-Up Success?” a study of the current state of women in U.S. venture-backed companies and how women in leadership roles affect the success of a start-up. Dow Jones reviewed 15 years of venture-backed company data and executive information in the VentureSource database.

For the study, "successful” companies were defined as those that exited through an initial public offering (IPO), is in IPO registration, is privately held and consistently profitable or has been acquired for an amount greater than its total venture investment (i.e. had an exit ratio greater than one). "Unsuccessful” companies were divided into two categories: "Not yet successful” were still private and independent, but have not yet become "successful.” "Failed” companies had ceased operations, gone bankrupt or exited at a valuation below their total venture capital funding.

The overall median proportion of female executives is 7.1 percent at successful companies and 3.1 percent at unsuccessful companies, demonstrating the value that having more females can potentially bring to a management team, Dow Jones concluded.

The study found 1.3 percent of privately held companies have a female founder, 6.5 percent have a female CEO and 20 percent have one or more female c-level executives. The most common positions held by female executives were within sales and marketing roles, accounting for 27 percent of the total population sample.

By industry, Dow Jones identified the median proportion of female executives at successful companies as higher than that of unsuccessful companies in the consumer services, IT, healthcare and business and financial services industries, which are the four largest sectors measured.

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