Attending a startup conference often feels like an anthropological study in contrasts. Growing unease sets in alongside the convenience of an empty women’s bathroom, while, on the other side of the door, male-dominated panels on gender diversity attempt to break down the cause for female-starved investment portfolios. Women are advised to apologize less, make bolder projections, and dole out firmer handshakes, as though exhibiting traditional male characteristics is the solution for this lack of representation. The underlying issue is deeper, and we need to shift the focus away from the entrepreneurs themselves and toward the people signing the checks.
Businesses co-run by women are outperforming their male-only counterparts, but not enough investors are betting on them. A recent report published by the Global Accelerator Learning Initiative (GALI)—a partnership between the Aspen Network of Development Entrepreneurs (ANDE) and Emory University that has collected data from nearly 14,000 early-stage ventures—found that ventures with women on their founding teams are significantly more likely to report positive prior-year revenues. However, they are significantly less likely to attract equity investors. Even though more than 50 percent of these ventures were run or co-run by women (indicating that there are, in fact, enough women running entrepreneurial endeavors), there was still less capital available to them compared to all-male founding teams.
This study further broke down the data to account for entrepreneurial experience and, regardless of prior experience, ventures run by men were more likely to have raised equity and less likely to have reported prior-year revenue than those with women. This trend remained consistent when the analysts isolated data for specific countries. For example, India-based ventures with women on the founding team were more likely to report revenue and employees, yet more than 60 percent of the ventures were comprised of all-male founders. Organizations such as Asha Impact, an ANDE member and impact-investing platform in India, are combatting this statistic by spawning businesses that account for gender inclusivity, but this imbalance was not unique to India. The data also showed that Mexico-based ventures led by women were four times less likely to have raised equity than ventures with all-male teams.
There is overwhelming evidence that businesses with women on the founding team deliver better return on investments. A 2018 study by BCG and MassChallenge showed that startups founded or co-founded by women generated 10 percent more in cumulative revenue over a five-year period ($730,000 compared with $662,000). A First Round Capital report found that companies with a female founder performed 63 percent betterwith their investments than all-male teams. And a Credit Suisse Research Institute paper concluded that companies with at least one woman on the board delivered higher average returns on equity and better average growth over the previous six years than their all-male counterparts.
Why, then, are investors less inclined to support women-run businesses?
Read more at Stanford Social Innovation Review
