The $1 Trillion Opportunity: Why Investing in Women-Owned Businesses Pays Off
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Investing has a gender problem. Statistics show that female entrepreneurs receive roughly 2% of VC funding. Let that sink in. Two. Percent. It’s hard to adequately put into words what a grim statistic that is, not least because of what it says about the deep gender bias in venture capital funds and investors – but also because of what it means for their bottom line.
Mind the Gap
Let’s start by asking why female entrepreneurs are so woefully underrepresented in overall VC investments. There are a few key factors contributing to investment inequity:
Straight up sexism. Research shows that investors are largely male and, as a result of either conscious or unconscious bias, they assess female founders differently. They ask them different questions: for example, male founders are more likely to be asked about growth and success, whereas female founders are more likely to be asked about risk and safety.
Knowledge isn’t always power. Men pitching in the tech space, even without a tech background, are automatically given the benefit of the doubt: they have a level of competence assumed of them. Women, on the other hand? We’re not even perceived as experts when we do have the technical background required, and when we don’t, it’s held against us. Meanwhile, male entrepreneurs who are branching out of their expertise are rewarded for expanding their market.
It’s a numbers game. Finally, there are just fewer female founders getting into the room with VCs. And don’t be mistaken—this isn’t because they haven’t got the passion, the drive, or the ideas. It’s because institutional barriers exist even before pitching begins.
Money talks
Look, we don’t need to tell you all the ethical reasons that it is beyond not OK for women to be this underrepresented in VC investment. But it’s also bad business—not only can female-led businesses compete with their male-led counterparts, they actually outperform them.
Female-led businesses offer a higher return on investment than male-led ones—in fact, one study even showed that they yield over double per dollar invested compared to companies led by men.
If you consider this is the success women are bringing to the table while already being at a disadvantage, imagine the potential if they are actually brought to the table in an equitable way to their male peers?
Lifting up others
Beyond the bottom line, female entrepreneurs also offer interpersonal skills that are invaluable in the investment and startup landscape. The same study that found women financially outperformed their male counterparts when it comes to return on investment found that women are also doing double duty: putting in the work to make their own businesses thrive and fighting to change a flawed system.
On both sides of the table—as investors and as entrepreneurs, women are more inclined to focus on businesses that have an overall positive social impact that has a lasting effect not only on their own industries but on society as a whole.
Women are also incredibly astute about risk-taking, which means they approach investing and entrepreneurship with a unique balance of ingenuity and practicality.
