In the face of one of the most uncertain global economic landscapes in recent memory, every level of the investment world is feeling the impact.
Public and private markets continue to falter. Decision makers are left holding the bag – literally – out of fear of that money whittling away.
In the world of startups, we’ve seen a lot of Venture Capital (VC) firms and early-stage investors shy away from the pie-in-the-sky startups that were all the craze a year ago. You know the ones: those buzzy companies that peddle possibilities as opposed to practicalities.
However, while there has undeniably been a transition away from hype and toward healthy financials, there are other historical factors that lend themselves to future success and returns on investment.
We’re not talking about patents or proprietary algorithms. We’re not talking about industry-renowned advisors.
We’re talking about something much more binary: gender.
It’s not a secret that the early-stage landscape has been overwhelmingly comprised of men. Similarly, the vast majority of funds invested in these companies have been directed toward those led by men.
To be precise, of the total money invested by venture capital firms in 2021, just 2% was given to female founders.
There is a host of information suggesting that female founders should not only get equal investment attention than their male counterparts, but more.
According to a 2018 Boston Consulting Group study, for every dollar of funding received by male-founded startups, those companies generated 31 cents.
For every dollar of funding received by female-led startups, the companies generated 78 cents – more than twice as successful than men.
These results are echoed by some of the industry’s most successful investors.
“This is real data: 75% of my returns have come from companies run by women,” Kevin O’Leary, one of the hosts of ABC’s Shark Tank and a strategic investor in the crowdfunding platform StartEngine, said.
O’Leary suggests that part of the difference is attributable to female founders setting more realistic sales targets. While male founders he’s worked with hit their sales targets 65% of the time, he says female founders hit their projections 95% of the time.
This “testosterone bravado,” as O’Leary called it, often leads to disappointed investors and completely stifled momentum.
The industry seems to be taking note.
In 2020, female-founded startups raised $22.6 billion across 2,641 deals.
In 2021, female-founded startups raised $54.6 billion across 3,871 deals, a 146% increase.
Even still, 2021 represented the smallest share of capital directed to female founders since 2016.
In the investment world, more successful startups being underfunded could be called an inefficiency.
What that means for you is this…
There are better opportunities to profit on startups with female founders and less competition to invest.
That sounds like a pretty favorable formula.
And it’s a big reason why we’re always keeping our eyes peeled for exciting female-led investment opportunities.
After all, we’re here to help you make money. It just so happens this is the best way to do that, statistically speaking.
Not a very well-written article, but very interesting (and unsurprising) content indeed. Thank you for this.