01:00 AM EDT on Sunday, April 18, 2004

BY SHANNON HENRY
The Washington Post

It's easy to find theories about why so few women run companies, harder to come up with data. A group of women academics decided in 1998 to try to fill that gap and recently came out with some intriguing findings.

The number of female venture-capital investors shrank slightly during the second half of the 1990s, and women venture capitalists have been abandoning the industry at almost double the rate of men, according to the Diana Project, named for the goddess Diana, the huntress, and conducted with the Kauffman Foundation of Kansas City.

In this case, Diana is hunting for money, and she isn't finding it as easily as her male counterparts.

Women represented just 10 percent of senior management in venture capital in 1995, a number that fell slightly to 9 percent in 2000. Those senior-ranking women were also typically the only high-level women at their firms, according to the study. The years tracked were the bubble years, when venture capital firms flourished and many new funds were created, which presumably would offer a greater chance of success to women or any new entrants to the field.

Even more surprising was the churn the study found within the venture capitalists' ranks. Of the women in the industry in 1995, 64 percent had left by 2000, while only 33 percent of the men departed during the same period.

The number of women in venture capital matters, the authors say, because of the tight-knit nature of that world. They note that in 1999, female entrepreneurs received less than 5 percent of such high-growth, high-risk capital in the United States, and they suggest the figure would have been higher if women were better connected to the venture-capital universe. Women in venture capital who were interviewed for the Diana Project said they don't give other women preferential treatment, but they do say they have women in their networks, while men interviewed said they considered few women to be in their networks, thereby limiting their exposure to women-led deals.

The underlying message: one reason women aren't running companies is because they're not getting the money needed to start them or keep them going.

"It's a cause for concern," says Patricia Greene, dean of the undergraduate school of Babson College. Greene wrote the Diana Project study along with Myra Hart of Harvard University, Candida Brush from Boston University, Nancy Carter of the University of St. Thomas and Elizabeth Gatewood of Indiana University.

Why didn't the researchers continue with the next logical questions: Why did the women leave and where did they go? Greene says they didn't ask because they frankly weren't expecting to find the high rate of turnover or the shrinking pool of female venture capitalists. "It's an unusual occurrence," she says. Now that the technology market and its money sources have contracted, the researchers expect new numbers in follow-up studies to be worse.

Amy Millman, president of Springboard Ventures, a Washington-based organization that coaches women-owned and -run businesses in the search for venture capital, says she values the study as a foundation but wants more information. "So they left. Why and who?" she asks.

Women's inroads into business and finance, says Millman, are trailing those into medicine, law and engineering, but they will eventually be made. "This is the first wave," she says. Next month, Springboard will host an event at the National Venture Capital Association's conference in San Francisco. Millman has invited Gatewood; people are talking about the study because conventional wisdom said venture capital was getting better for women, Millman says.

Although the study provides few answers, it does bring up myriad issues to be tackled next by researchers. Greene points out that the lack of women in this industry means few women are personally deciding where technology money is being spent. Having a group of people with similar attributes control decisions about anything, from putting out a newspaper to backing biomedical research, means other voices aren't being heard. "The impact of diversity is important," says Greene.

The Diana Project authors plan a follow-up to answer some questions raised by their initial research. They've compiled much of what they've learned so far in a book, due in June, titled Clearing the Hurdles: Women Building High-Growth Businesses.