We have known for a long time that women led businesses perform well. In a study analyzing the relationship between the composition of corporate boards and financial performance, Catalyst, a research organization on women and business, found a greater return on investment, equity and sales in IT companies that have directors who are women. And yet many companies – not only IT companies – struggle to attract and retain high performing, senior women.
But it’s not only women at the top that drive business value. While the gender pay gap remains resolutely at an unacceptable level – women continue to earn about 80 cents for every dollar earned by a man – we also know that diversity in the workforce also creates benefit for companies, industries and whole economies. For example, eliminating the gap between male and female employment rates could boost a country’s GDP by up to 34%. This means that there’s a positive multiplier effect that comes from eliminating the gender pay gap – yet the logic of the situation in no way guarantees the change that would improve all our lives.
Clearly, we need to focus on a pipeline of female talent and strategies to engage, support, strengthen and retain women as they move through our enterprises. We also need to continue to push for equal pay and opportunity where ever possible.
But what about the startup sector – the high growth businesses that are generating unprecedented wealth across the globe? Given the fast moving, high growth focus of most venture capital and investment firms, it would be easy to think that the smart VC money would be on female founders. After all, Kimberly Weisul’s recent article on startups makes it clear that when it comes to revenue, women are pulling in more sales even when they start with smaller investments.
For every dollar raised, women-run startups generated 78 cents in revenue, compared to 31 cents for men. By that measure, if investors had put the same amount of capital into women-run companies as they did into the ones run by guys, they would have helped generate an additional $85 million in revenue.
Weisul’s article references a Boston Consulting Group study that reveals that investments in female founders averaged less than half the level of investment flowing to male founders. In fact, there was almost $1 million difference. However, over a five year period, the startups that were founded and cofounded by women out-performed all others.
What this suggests is that there are opportunities for high performing investment being left on the table:
… investors should understand that current market forces make women-owned companies very promising opportunities. The lack of funding means that there is less competition for women-backed companies, and those companies, on average, perform better than those with all male founders.
And while the current models of startup investment place female founders at a disadvantage, business leaders should see this as an opportunity on a number of fronts:
As investors: identifying and investing in female founders could prove personally and professionally lucrative with the right frame in mind
As mentors: leveraging your years of enterprise experience could be the difference between a great startup business and the next unicorn
As coaches: providing feedback on pitch presentations, working with founders to improve and strengthen their confidence, preparation and leadership.
Seek out organizations like the Leadership Advisory Group, or join an angel investors network and put your leadership ability, expertise and experience to work.
Nina Nets It Out: When it comes to backing innovation – whether in the enterprise or in the startup sector, there is a great deal of value to unlock by promoting and supporting women. Leaders can make personal, professional and industry-wide impacts when they strategically back female founders and emerging women leaders.