It's women's history month! March is the time to celebrate women's economic, cultural, and political achievements everywhere.
To celebrate the holiday’s 35th official year, we’re spotlighting female entrepreneurs with the grit, spirit, and power to change the world for the better.
A quick note on Women’s History Month and the history of the feminist movement:
As we transition from celebrating Black History in February to Women’s History Month in March, we recognize that not all movements were created equal. Historically, the feminist movement has left behind marginalized women, especially Black women. Intersectionality is an important and necessary part of all movements, so this month we will strive to provide content that goes beyond the surface and touches on unique, intersectional experiences from diverse women.
Throughout Women’s History Month, we’ll be doing a few deep dives into how women are impacted (and impactful) when it comes to VC funding, entrepreneurship, access to resourcing, and more. Today, we’re talking about how businesses founded by women are often more lucrative and the evidence that supports that.
It’s no secret that female founders have a harder time accessing capital than their male counterparts. In fact, female-founded companies generate an average 35% greater return on investment than all-male teams. Here are just a few of the examples of how women often succeed as founders.
Female-founded startups generate more revenue
Research from Boston Consulting Group (in conjunction with MassChallenge) found that female-founded startups generated 78 cents of revenue for every dollar raised. In contrast, startups run by only men performed significantly worse—yielding only 31 cents on the dollar.
Another study, conducted by Babson College, found that companies with at least one woman on the executive team were 64% more likely to achieve profitability and produced a greater return on investment than those without women in executive positions.
Those numbers don’t lie – and VCs are catching on. First Round Capital, a firm that prides itself on funding a high percentage of women-led businesses, found that the investments they made in startups with at least one female founder performed 63% better than those with all-male founding teams. The study measured the average change in valuation from the time the initial investment was made.
Black and Latinx Women stay in the game longer
According to ProjectDiane, a biennial demographic study of startup founders in the U.S., companies founded by Black and Latinx women have an average two-year fail rate of 27%... much lower than the overall average of 40%.
This may be because capital is so scarce for Black and Latinx female founders. Only 57% of the companies in the ProjectDiane database have ever raised funding - meaning their founding teams have bootstrapped the business using their own capital. Not only does that ensure the founders have skin in the game… it also typically means the team knows how to stretch every dollar and execute carefully measured growth.
Commitment to sustainable growth isn’t just specific to women of color, though - the trait is a common driver of success for all female founders.
Women focus on the big picture
Entrepreneurship is not a get-rich-quick scheme, especially in the startup game. It turns out that women understand this more than men.
According to a study by Illuminate Ventures, male founders are almost eight times more likely to be motivated by money (15%) than women (2%).
There’s obviously nothing wrong or surprising about a founder wanting to make money from their business. Still, studies have shown that “necessity” entrepreneurs – those who found companies because they want or need to make money from it – are 60% more likely to default than those who are driven by passion for the opportunity at hand.
That’s because money-motivated leaders tend to make worse decisions when faced with setbacks (think unexpected costs, regulatory obstacles, etc.). Without that passion driving them, money-motivated founders are more likely to simply quit when the going gets tough – and building a business from the ground up is as tough as it gets.
Once a company is up and running, the job doesn’t get any simpler. It’s critically important for a startup founder to have excellent management skills – because when a business is running lean, everyone on the team needs to be 100% committed to the founder’s vision.
One key way a founder can gain employee loyalty is by being a supportive leader.
Women do more to support their teams
When leadership supports the well-being of their employees and prioritizes diversity, equity, and inclusion, employees are more content, less burned out, and more loyal to their employer.
Studies have shown that longer-tenured employees benefit a company’s bottom line in several ways, including organizational wisdom, team performance, and relationship stability.
As you can see in the chart below, women in charge are more likely to check in on their team members, help manage their workloads, and provide support for team members who are experiencing burnout or dealing with work-life issues.
In his book, The Founder’s Dilemmas, former Harvard Business School professor Noam Wasserman found that 65% of startup failures are caused by poor management at the senior level. In short: good management matters in startups.
Women are more well-rounded leaders
There’s a prevailing myth that women are inherently less suited to leadership roles than men. Statistically speaking, men are more likely to speak up in meetings, more likely to be viewed as “brilliant,” and more likely to take risks.
Research by the Harvard Business Review proves otherwise. In an analysis of over 8,500 “360-degree reviews” – feedback surveys from an employee’s subordinates, colleagues, and supervisors – women were found to outperform men in 17 of 19 key leadership skills, including taking initiative, inspiring others, driving for results, and more.
Here are the top 10 findings of that assessment:
Women-led startups exit a full year faster – and at higher multiples
According to Pitchbook’s annual report on women-led startups, female founders don’t just add value as managers and leaders… they also contribute to faster exits, with more growth, than companies led only by men. Between January and September of last, female-founded companies exited for a combined $58.8 billion – 42% higher than the overall market. Meanwhile, startups with at least one female founder exited, on average, one full year earlier than those with all-male teams.
Despite the overwhelming evidence that women in leadership create more upside for investors, they only secured a sliver of the total amount of venture capital in 2021. Of the $166 billion raised last year, businesses founded by both men and women received only 11.7% of the pie, and female-only founding teams raised only 2.2 percent, according to Crunchbase data.
That disparity becomes even more alarming when you look at race; in 2020, just 0.64% of startups led by Black and Latinx women received venture funding.
This number has been trending up in recent years, with the creation of several women-led funds, incubators for female founders, and more new companies being created. From 2018 to 2020, venture funding to Black and Latinx women-led businesses tripled, from $1B to $3.1B.
Here at Republic, we pride ourselves on featuring some of the most innovative and accomplished female founders in the world.
Check out these female-founded deals that are live on our platform right now.