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The next Steve Jobs will be a woman. She understands how to solve a specific problem facing this world by leveraging tech. She knows the diverse and inclusive team it will take to build the product and implement solutions. She’s an experienced entrepreneur who knows how to operate with the leanest resources because, let’s face it, she’s had no choice considering how VCs have invested 98% of their capital in startups led by men. And the women-led startups that did raise capital, on average, raised 36 times less money in 2017 than those founded by men, according to PitchBook Data Inc.
But is the tide turning as more VCs diversify the startups in their portfolio? For example, Indie.vc, a fund founded by Bryce Roberts, (and currently accepting applications for their next round of investments) has been intentional about recruiting women-led startups since it launched and 50% of their portfolio is comprised of startups founded or cofounded by women. Golden Seeds has also focused on significantly diversifying their portfolio with women-led startups. Make no mistake though, these VC funds are not funding women-led startups as charity. They are investing in women founders because they understand the strong ROI of investing in diverse startups.
Here are 10 stats that build the case for investing in women-led startups. If you’re an investor, print this list out and post it on your wall to remind yourself to stop leaving money on the table. If you work with investment associates on your team, tape yellow sticky notes to their laptops so they never forget this money-making data.
- Private technology companies led by women are more capital-efficient, achieving 35% higher ROI, and, when venture-backed, 12% higher revenue than startups run by men, according to the Kauffman Foundation.
- Women founded companies in First Round Capital’s portfolio outperformed companies founded by men by 63%, as measured by returns for investor.
- In a study of over 350 startups, Mass Challenge and BCG determined that businesses founded by women deliver higher revenue—more than 2 times as much per dollar invested—than those founded by men, making women-owned companies better investments for financial backers. The authors calculated that VCs could have made an additional $85 million over five years if they’d just invested equally in both the women- and men-founded startups.
- Despite the severe funding gap, startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period, according to BCG.
- Companies in the MSCI World Index with strong women leadership generated a Return on Equity of 10.1% per year versus 7.4% for those without strong women leadership, according to MSCI ESG Research.
- “Women-owned businesses are growing much faster than all businesses. From 2007 to 2018, women-owned businesses grew by 58% in terms of the number of firms and 46% in terms of revenue,” according to American Express research advisor Geri Stengel. “What’s driving these numbers are women of color. Women of color over that same period of time are starting businesses at a much faster rate. The number of firms owned by African-American women has grown by 164% since 2007.”
- There is a strong and statistically significant correlation between the diversity of management teams and overall innovation. Companies that reported above-average diversity on their management teams also reported innovation revenue that was 19% points higher than that of companies with below-average leadership diversity—45% of total revenue versus just 26%. And Gallup, found that more diverse companies have 22 percent lower turnover rates. Less staff turnover creates a stronger company which aids company growth immensely.
- Latinx women-owned businesses saw more than 87 percent growth between 2007 and 2012, according to Project Diane.
- Women were the sole or majority owners of an estimated 12.3 million U.S. businesses at the beginning of 2018, and were starting additional businesses at a rate of more than 1,800 (net) per day, according to “The 2018 State of Women-Owned Businesses Report,” commissioned by American Express.
- According to Golden Seeds, many women-led startups are led by serial entrepreneurs bringing a wealth of experience to companies that need to scale quickly. In 2017, serial entrepreneurs were 1/3 of the women-led companies in which Golden Seed’ network invested, marking a significant shift.
All the data shows that women-led startups, on average, have better ROI when invested in. Due to the paltry amount of investments currently going to women-led startups, investors now have an enormous market opportunity to invest in many of the most innovative ventures, which just happen to be led by women, and make billions of dollars.
No more excuses. The math adds up. Invest in women-led, diverse startups and you will make big returns!
January 28, 2019 at 05:23PM
Forbes – Entrepreneurs