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In the age of the prominent founder, investors and commentators alike are consumed by the business giants that seemingly have taken over the world. Our appetites are relentless when it comes to the most routine actions or soundbites from Musk, Bezos, and Zuckerberg. And in today's memedized markets, investment money and airtime flow to these executives and their companies in far greater amounts than anything else.
As any Twitter jockey will eagerly explain, the best investors are contrary. They jump on trends before anyone else, find gold in other people's trash, and are greedy when others are scared. But the greatest and most obvious contradicting game is one that has always been around and that makes no effort to discover it.
Female founders and companies run by women have astonishing upside potential, despite systemic obstacles. Start with investors trying to support the next Bill Gates.
See Also: Who Is The Best Female Founder In Your State? (Infographic)
Perspective required, stat
As anyone who has ever walked down a street can observe, the population hovers almost equally between men and women. But this is where parity ends. According to Crunchbase, venture capital financing for female founders accounted for 2.3 percent of the total for 2020. That is a 2.8 percent decrease in 2019, which was an all-time high.
In 2019, Harvard Business Review reported that 7 percent of board members in elite startups were women.
Advocacy group All Raise found that women were 13 percent of “decision makers” in venture capital funds. 65 percent of the funds had no female partners.
The social implications here are obvious and discussed in detail. From an investment perspective, it's just really stupid.
Related: Bumble Founder Reveals How "Question Of The Nine" Can Help You Stay Focused
Even with a tiny bit of funding and insufficient support from the financial world, women-run startups outperform. In 2018, the Boston Consulting Group sponsored a study comparing startups run by men and women. Of the 350 startups observed, BCG found a two-to-one funding advantage for the male founders. The women-led startups were also found to have a total of 10 percent more revenue over a five-year period. This was equivalent to sales of $ 0.78 per dollar for the women and $ 0.31 for the men.
This does not mean that women are inherently better business people than men. It's interesting, however, that an industry that prides itself on objective quantitative analysis has such a blatant blind spot.
Aside from the numbers, there are a few simple observations to make:
1. Since most startups are founded, managed and funded by men, they are usually aimed at male audiences, even if the product or service is not geared towards a specific gender. This could easily be changed if companies seek equal representation in decision-making positions, but most do not. A Kaufmann Fellows study found that companies run by women employed 2.5 times as many women. The resulting variety of thoughts is undoubtedly good for innovation and business strategy.
2. Many startups fail because the teams never found the product market to be right or grossly overestimated the addressable market. It's hard these days to find a pitch deck that doesn't have recurring annual income of $ 100 million to $ 100 million between year 1 and 3. The adapted social media meme “Lord, give me the trust of a 25 year old male startup founder” is true.
The one-sided fundraising environment forces female founders to show more specialist knowledge and more conservative, achievable goals. They are scrutinized more closely than their male counterparts at almost every step of the startup journey.
Put simply, outperform female founders because they have to.
3. Both investors and consumers are voting more and more with their dollars, especially the younger masses. Bruce Deboskey of the Denver Post recently wrote that 90 percent of the 68 million Gen Z members believe companies must act to solve social and environmental problems. With data like this, any new startup that earns its weight in clubhouse rooms needs to be purpose-built. Women and minority founders have a great advantage here, as they are more likely to have witnessed (or fallen victim to) the societal problems that urgently need to be addressed.
Again, it's not a blow to male founders (I am one), but it's just harder to sympathize with and champion causes that have not been experienced.
Related: A Founder's Tips For Fundraising
Timing of the trade
The best time to invest in female founders was the day we started investing in female founders. The second best time is today. None of the studies or data presented above are brand new or surprising to anyone who has paid attention. There are more stakeholders, accelerators, incubators, and thought leaders focused on this than ever before.
There are headlines showing how wrong the institutions were in ignoring half the population. Whitney Wolfe Herd, the 31-year-old Bumble founder, is one of the youngest self-made billionaires in the world. She co-founded Tinder, had a bad experience with one of the other founders, and left to start a dating app that approached things from a woman's point of view. When she rang the opening bell on Nasdaq earlier this year, she did so with her 18-month-old son on the hip.
We'll hear many, many more stories like this in the years to come. Of the endless investment criteria and pontification that investors undertake to achieve the next success, female founders may have the most asymmetrical returns of all.