Women-run companies are investment havens. They outperform their male-owned counterparts by a great margin. Despite the stereotype that women tend to run small businesses dealing with fast-moving consumer goods, women-owned firms spur economic growth.
Unfortunately, the venture capital pitch process doesn’t favor female founders. In 2018, only 3% of venture capital went to companies with a female CEO. It’s about time this figure increased as research shows that the number of female-owned businesses has gone up--both in the US and around the world Here are some reasons why investors need to back more female startups.
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Women are Performers
According to one report published by Kauffman Fellows, most women-led companies generate higher investment returns than those led by men--by up to 35%. And while men score highly when it comes to technical and professional expertise, women are generally better at business leadership.
They're good at taking initiative and display high levels of integrity and honesty. Women are also more resilient and can remain calm in stressful situations for longer than their male counterparts. They are highly competent organizational leaders and are only held back by lack of opportunities.
Better Risk Takers
Without question, men are bigger risk-takers than women. This is mostly attributed to gender characteristics such as psychology. Women tend to be more conservative when taking risks, but when they do, they make smart moves. For example, when looking for business financing, they research everything thoroughly, even title loans online. They take everything into account before reaching a decision.
Additionally, men tend to take more risks when stressed. This can be detrimental to a business. On the other hand, women rarely take risks when stressed, and for this reason, make more sober business decisions than men.
Frequently asked questions
Less Driven by Money
The motivation for starting a business varies significantly based on gender. Men are driven by money when starting a business. Up to 15% of men will assess the financial gains compared to only 2% of women. Decisions driven purely by money can be harmful to a business. If you’re only motivated by money, you may lose focus when faced with difficult situations.
Money is not the most effective motivator. One study conducted by Yale University revealed that the participants who were motivated by money were less likely to graduate or receive promotions. Entrepreneurship is not a get-rich-quick scheme. Most business owners earn less than they would if they were working for someone else. The world’s top entrepreneurs consider money a secondary byproduct of entrepreneurship. They want to have a positive impact on the world.
It’s Time for Change
Most venture capitalists have outdated prejudices they use to lock women out.
- Women tend to get more easily distracted by family life than men.
- They have fewer connections to strategic partners.
- They start more lifestyle businesses than tech firms (which are considered high-growth businesses).
Thankfully, some investors are now working hard to bridge the gap. They are investing more in female-owned startups, and the results are impressive. For example, First Round Capital reported that the female-owned businesses it had funded outperformed male-owned ones by 63%.
