It’s no secret that women-led companies receive less Venture Capital funding—a measly 2.3% of total funds last year to be exact, according to Crunchbase. This lack of funding is bewildering, given the number of female-led private companies whose return on investment is equal to or significantly better than male-led companies.
Female-led startups outperform male-led startups
First Round Capital found over a 10-year period that its investments with female-founded companies performed 63% better than the all-male founding teams it had funded. A Kauffman Fellows Research Center found that women-led, privately-held tech companies generate a 35% higher return on investment than male teams.
Let’s talk facts
It doesn’t help that approximately 12% of decision-makers at VC firms are women, and most firms don’t have a single female partner. Of all partners at these firms, only 2.4% are female founding partners. When women-led startups do get funded, they’re more likely to be successful. They “ultimately deliver higher revenue—more than twice as much per dollar invested,” a Boston Consulting Group analysis found.
It’s difficult to pinpoint why female companies achieve such results, but funders have surmised that heavier pushback by investors drives women to craft especially strong business plans. Also, pushback can help build resilience and adaptability, two crucial mindsets for entrepreneurs.
Not only do women-run startups have a successful ROI, but they also hire more women. Startups with a female founder fill their staff with 2.5 times more women, according to an analysis by Kauffman Fellows, a program designed to accelerate entrepreneurs’ success. Companies with a female founder and a female executive hire six times more women.
Women-led businesses also are more likely to be focused on making a social contribution, according to research published in the Journal of Entrepreneurship & Organization Management. And they are adept at building good relationships with employees because they are scientifically more empathetic, according to this study.
Let’s Talk Solutions
Thankfully, people have stepped to the plate to start addressing these issues.
The recent numbers “show that the flywheel of male-dominated wealth creation is hardening,” said Pam Kostka, CEO of All Raise, a nonprofit that advances the careers of women in VC. “So, what’s the solution? Tech and VC are industries built on two things: relationships and insider knowledge. This is why at All Raise, we operate an access, guidance and support model focused on creating a more inclusive network for female founders—opening doors to new funding, talent, customers and partnerships; and providing expert business advice and mentorship to help founders fundraise smarter, scale faster and build community.”
All Raise, located in the Bay Area, is just one of the many companies looking to bridge this funding gap.
Another Bay Area company pushing for investments in women-led startups is the VC fund How Women Invest.
Enter Dallas-Fort Worth. TechFW is stepping to the plate to do its part. The tech incubator and accelerator in Fort Worth is putting on an online event May 20 called Women & Wealth to specifically address these concerns. And it is being joined by some powerful D/FW companies in the startup funding world: Cowtown Angels, Texas Woman’s University, Texas Women’s Foundation, True Wealth Ventures, Satori Capital and Golden Seeds.
Laura Baldwin, Managing Director at Golden Seeds, is scheduled to speak at the event. “Women are creating innovative companies at unprecedented rates, yet they receive a lot less funding than men. It is crucial that we close this funding gap,” she said.
My hope is that this event removes barriers for women looking to get funding for their startup or get into investing in startups themselves.
Voices writer Lauren Acton is the marketing director of TechFW, a Dallas Innovates partner organization.
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