Female Founders Outperform - Yes, Really
A story that often gets ignored or lost in the headlines is the fact that female-founded or cofounded companies outperform male-founded companies. A statistic that should translate into more dollars being invested in female founders. But I leave that for another day.Today, I want to look at some reasons why? Let’s start with a few fun facts lest you think I am referring to a one-off study.
Boston Consulting Group and MassChallenge found that startups founded or cofounded by women generate 10% more in cumulative revenue over a 5-year period.
First Round Capital looked back at 10 years of investments and found female founders performed 63% better than their investment in all male founding teams.
A Kauffman Fellows Research Center found that women-led, privately-held tech companies generate a 35% higher return on investment than male teams.
Yes, I am sure there are studies that support a range of comparative performance outcomes, but it’s worth talking about (or shouting out!) these.
Capital Efficiency
Female founders are more capital efficient, doing more with less.
Women led startups launch on 1/3 less capital than their male counterparts. They scale with less funding – they have to, they get less than 3% of venture capital dollars.
Why are they so efficient? Perhaps it’s because female founders are more methodical and disciplined in their decision-making process assessing the cost/benefit of each dollar spent. Or, they are more likely to make sacrifices for the sake of the business. My guess is, it is out of necessity. They fight it out and refuse to let a lack of funding stop them from building their business.
Leadership Style
As leaders, women tend to take a collaborative and relational approach. They not only bring their team together, they also leverage their senior managers by taking the time to understand how they work, what motivates them, and where they have the most value.
By bringing together more voices in the room, women listen to a diverse set of opinions, perspectives, and ideas and encourage open discussions and debate. Diversity coupled with collaboration leads to better decision-making, better problem-solving and more innovation. Which, in turn, leads to better performance.
Risk
This one I think could go either way. If you accept the notion that women are more risk-adverse then men, does that help or hurt when building a business.
Certainly, starting a business is a risk and you need to be willing to take risks to scale a business. Part of being a startup is making decisions on the fly, with little information, or operating in the grey zone.
And, sometimes the big bet pays off and, sometimes, it doesn’t and you fall flat on your face.
On the other hand, risk taking can also mean making short-term decisions at the cost of long-term growth. Taking a more cautious approach, slow and steady, setting realistic goals and objectives can lead to stable growth.
When setting strategy and developing their business model, women spend time considering everything that can go wrong and try to design around that, focusing on downside protection rather than the huge upside potential. It has been noted that women are asked these preventive questions by venture capital firms while male founders are asked promotional questions.
There are probably a number of other explanations. The story of the underdog – women don’t want to be underestimated. Or, women are better at time management. There are other interesting theories I have read, for example, female founders are less money hungry and more intrinsically motivated which means they are more committed to going the distance and will persevere through the obstacles.
Whatever the reasons, women are kicking $ss and the venture community should be taking notes.
