Babson Magazine

Spring 2015

Realizing Untapped Opportunities


Illustration: Neil Webb/

“This is not a woman’s problem,” says Candida Brush, professor of entrepreneurship and co-founder of the Diana Project, established in 1996 to research women-led businesses. Women encounter huge hurdles when trying to obtain venture capital, she says. “After 30 years of thinking about this and analyzing data, my argument is that it is not up to the women now. It is up to the institutions to change.”

Only 2.7 percent of U.S. businesses receiving funds from VC firms had women CEOs, concluded the widely reported findings of a new study on VC funding for women entrepreneurs conducted by Babson professors leading the Diana Project. The number goes up to 15 percent if a broader view is taken to include ventures with women on their executive team. “But we do not know if those women are in leadership roles,” says Brush.

To put these findings in context, consider that women entrepreneurs are majority owners of about 36 percent of all U.S. businesses, according to the U.S. Small Business Administration. An article in Fast Company claims that about 47 percent of all U.S. businesses are co-owned by women. The question arises: If this large population of women entrepreneurs exists, why are so few deemed qualified for growth by venture capitalists? That’s the question Brush and her colleagues asked when launching the Diana Project, and they still are asking it today. Equally scant is the presence of women partners at VC firms: 6 percent. “How are women entrepreneurs going to penetrate that sort of gender-biased industry?” says Brush. “They’re not. The institutions have to start paying attention, and they have to do it strategically.”

Having worked in the investing and VC industries for more than 15 years, John Burns, MBA’05, says that until last fall, when Brush asked him to serve on a panel presenting the research findings, he never thought about the lack of women in VC. “I didn’t have a reason to,” says the CIO and co-founder of Boston-based Breakaway Innovation Group, a brand capital firm that provides VC funding and strategic consulting to startups. “Admittedly, there weren’t a lot of women coming through our door, but, when they did, I never thought differently about them.”

Still, surprised and bothered by the report’s numbers, Burns decided to come up with a way to raise awareness of the issue among VC firms. His idea: Create a contest aimed specifically at women entrepreneurs. The prize, provided by Breakaway, will be $250,000 in VC funding and a full brand platform, which Burns values at more than $100,000. Partnering with Breakaway is Babson’s Center for Women’s Entrepreneurial Leadership, which will pull together the event.

Scheduled to begin this fall, the Babson Breakaway Challenge will accept applications from any woman entrepreneur looking to take her business to a new level. From the applicants, 25 semifinalists will be chosen to receive a day of training and participate in a demo day, during which they’ll pitch their businesses. This group will be narrowed to six finalists, who will receive one-on-one coaching sessions from contest judges, including Burns and, he hopes, five experienced female entrepreneurs and venture capitalists. Burns also wants women aspiring to be venture capitalists to serve as assistant judges so they can make connections and learn from the veterans. If all goes accordingly, a contest winner will be announced in March 2016.

Burns is quick to point out that his plans aren’t entirely altruistic as Breakaway has the potential to profit if the contest succeeds. “The most obvious benefit to us is we get an investment in a company that we hope becomes hugely successful,” he says. “But the VC industry is incredibly competitive. If we can launch a really successful company and highlight 24 other female-founded businesses, I believe we will attract the attention of other venture capitalists.”

Venture capitalists need to pay attention, says Brush, both to bringing more women into their folds and investing in more women-led businesses. “Evidence shows that if you have a homogeneous decision-making group you won’t be as innovative, you won’t be as creative, and you’re going to make more mistakes,” she says. “There is an enormous untapped opportunity.”—Donna Coco