Women have, unfortunately, long been a minority within the startup industry. A reported 63 percent of startups have no women on their board of directors, and 47 percent have no women in leadership positions at all.
The VC funding numbers are even worse: Female founders received just 2.2 percent of all VC dollars in 2019, and just 2.5 percent of all VC-backed startups have an all-female founding team. And on the VC side, only 9 percent of investors in tech startups are women.
Yet, despite their lack of representation and funding, women have managed to make an incredible impact on the industry. One of the most commonly-cited statistics regarding gender diversity within startups still remains shocking: Women-founded and co-founded startups have been proven to return 78 percent per dollar invested, compared with 31 percent for those founded only by men.
This pattern is common amongst all industries; for example, in the banking industry, women make up only 2 percent of bank CEOs worldwide and just 20 percent of their boards. However, banks that have women in top positions are found to have better fiscal profiles and lower risk to the consumer. And in addition to improving finances, startups that include more women on boards have been discovered to increase firm innovation and board effectiveness.
There are a few different hypotheses for why women have such impressive success when they’re in leadership positions at a startup. One theory is that because women often need to pitch their startup to more investors before they’re finally able to reel one in, they gain more opportunities to refine their pitches and business ideas. This can lead women to creating sharp business plans with realistic projections that help them find success faster once the business is up and running.
In fact, research from Boston Consulting Group showed that male startup founders are more likely to “overpitch and oversell,” while women tend to pitch more conservative numbers that don’t end up crashing and burning like those often pitched by their male counterparts.
Women also rank highly for leadership skills across the board.
According to a 2019 Harvard Business Review study, “Women are perceived by their managers — particularly their male managers — to be slightly more effective than men at every hierarchical level and in virtually every functional area of the organization.” The study also reported that women are rated as “excelling in taking initiative, acting with resilience, practicing self-development, driving for results, and displaying high integrity and honesty.” They were also reported to be more effective in 84 percent of the competencies that HBR most frequently measures.
Not only are women driving higher ROI and innovation for startups across industries, but they’re also bringing more diverse ideas, and different problems, priorities and insights into creating startups made by women, for women.
According to the BCG study mentioned earlier, “Many of the female interviewees told us that their offerings—in categories such as childcare or beauty—had been created on the basis of personal experience and that they had struggled to get male investors to understand the need or see the potential value of their ideas.”
While it may be harder to pitch these women-centric ideas to male VCs, these issues actually present women with unique business opportunities to solve problems that directly affect them and their target market.
These products and services created directly as a result of being women and understanding women’s issues in a real, genuine way is clearly paying off. Women are the world’s most powerful consumers, making up 70 percent to 80 percent of all consumer purchasing decisions, and they’re only getting more powerful: It’s estimated that women now control a whopping $20 trillion in spending globally.
Female investors and smart male investors understand that this global spending power, in addition to the fact that female-owned startups get less funding yet consistently outperform male-founded startups, should be invested in for a bright future.