With all the money that goes into researching potential companies, investors are missing a tested success strategy that could mean big profits.
Endless factors go into the final decision on whether or not to invest seed money in new tech companies. After all, we are talking about millions of dollars and that’s just the beginning, hopefully. With the market moving at a breakneck pace, it’s more important than ever that investment capital finds worthwhile ideas and organizations. But one consideration has been largely overlooked – the untapped human investment is women.
It is clear from the results of numerous studies that women-led startups have a higher predictability of success, yet they only represent a narrow slice of the tech industry when it comes to founders, CEOs and executives.1 Let’s take a look at the numbers.
In preparation for the “Women Startup Challenge” happening in New York City on November 1, 2015, Craig Newmark, founder of Craigslist who is co-sponsoring the event said, “Only seven percent of all investor money goes to women-led startups. Yet, studies show that women-led ventures deliver a 35 percent higher return on investment and generate 12 percent more revenue than male-run startups.”1
Another study at Gallup states that women are better bosses than men for a few reasons: women bosses’ level of engagement was higher, and of the people queried, those who worked with female bosses overwhelmingly felt like their development was a priority for their female bosses. This same study indicated that women bosses show their appreciation with feedback way more consistently than men.2
First Round Capital released a report on July 30, 2015 and found that among 300 portfolios examined, companies with at least one female founder did a whopping 63% better than all-male teams. The data also showed that women are present in the top ranks of their ten most valuable companies.3
Why do women-led companies tend to perform better than all-male companies?
Engagement- Women tend to work with their employees’ strengths to facilitate growth, and that is a clear illustration of usefulness that motivates a team. They naturally excel at seeing the big picture and enabling all the moving parts to function optimally.
Calculated risk- When it comes to taking risks, “women have the edge: 87% see themselves as financial risk takers, compared to 73% of men, while 80% of women say they are likely to see opportunities where others see risk, compared to 67% of men,” says David Prosser of Forbes.4
Ambition- Like any underdog, women feel the need to prove themselves in the market. This means many of them eventually envision striking out on their own rather than remaining an employee. They also tend to face adversity with more determination and resilience.
Playing the long game– Where men are more prone to make immediate and often short-term decisions, women, according to studies, are more likely to arrange their goals around the long term. They prioritize for slow, stable growth rather than a boom and bust mentality.
Compassion is successful– If you look at some of the most successful launches in recent years conducted by women, they are often geared toward solving an immediate and high priority problem. Take Jessie Baker of InPress who is developing a device that can stop post-partum hemorrhaging, or Tessa Lau, Co-Founder of Chief Robot Whisperer, who designs user-focused systems around the study of human machine interactivity. These companies have contributed valuable innovation and generated considerable profits, in part because they have larger social goals.
Self Interest vs. Reinvestment- Sarah Fink at the Centre of Entrepreneurs says “Women entrepreneurs are more likely to work toward controlled, profitable growth with relatively little interest in merely positioning themselves for lucrative exit. They often prefer to re-invest business profits over equity investment to scale sustainably.”5
Venture capitalists really miss an opportunity for sustainable profitability if they do not actively seek out female entrepreneurs and developers. Organizations that stress collaboration, creativity and communication are often unsurprisingly better performers, and women are contributing to this social shift in the workplace. Women, it turns out, are good for business, and thankfully, more recognition and support are generating opportunities for the intelligence, innovation and hard work that women have to offer.