July 19, 2024


Unlimited Technology

Three Reasons Why Women-Led Startups Are Flourishing And And How Leaders Can Support Them

Wendy Gonzalez is the CEO of Sama, the provider of accurate data for ambitious AI.

Over the past five years, we’ve witnessed an incredible societal movement to bolster women’s voices across all industries and sectors of life. Women in business have made much progress, and I think women’s role in our society has in many ways shifted for the better. Still, investment and support for women-led businesses lag. 

Despite calls for further representation, women-led startups account for just 2.2% of the $150 billion invested in companies by VCs annually. What’s more, due in large part to the Covid-19 pandemic, that number has decreased in recent years. 

Though often overlooked, these businesses continue to flourish. While they already account for over $1.8 trillion in profit each year, women-led businesses need advocates to bring their ideas to fruition. And while only 12% of VC decision-makers are women, all VCs stand to benefit from investment in women founders and executives. 

Let’s take a look at just three of the reasons why. 

Improved Profits

When VCs invest in women, they make more money. Research has shown that female leadership can impact business performance and overall growth. In a survey of more than 350 startups, Mass Challenge and BCG found that women-run businesses deliver higher revenues, equating to more than twice as much per dollar invested.

A report completed by MSCI ESG further supports these findings and showed that companies with strong female leadership generated a return on equity of 10.1% per year versus 7.4% for those without. And perhaps most clearly reflecting this reality, researchers found that when comparing the returns of Fortune 1000 companies led by female CEOs to those of the S&P 500 between 2002 and 2014, the companies with women in leadership saw returns that were an astounding 226% higher.

I think these revenue increases are in no small part due to the diversity in perspective women-led workforces foster. Aligned with the benefits of improved racial and ethnic diversity, giving women the power to share ideas can enrich a company’s overall business outlook and strategy to produce tangible benefits to bottom lines. 

Better Company Culture

Beyond leading a company to succeed financially, women are particularly successful in creating a positive company culture. While investigating the real-world benefits of women-led companies, the Journal of Organizational Behavior found that women-led teams were more collaborative, communicative and open to learning, both when in-office or managed remotely. Similarly, Berlin Cameron found that half of Americans would prefer to work for a female-led company given they can be more purpose-driven, more likely to include access to childcare and more likely to offer equal pay.

In addition to offering VCs and key stakeholders benefits financially, working for a women-led business can completely transform an employee’s work-life balance and overall experience. Peakon, the HR insights platform, found that women-led companies better achieve overall job satisfaction needs than those managed by men. This can result from better-communicated business strategies and missions, more inspiring belief in the provided product or service and improved workplace autonomy. 

With these outcomes in mind, it’s clear that many employees enjoy working for women and may be more likely to genuinely care about their performance and the company’s broader success when the business fosters a positive culture.

Representation And The Future Of Our Global Economy 

Over the past year and a half, women’s careers have been at risk. A McKinsey analysis found that women’s jobs have been 1.8 times more vulnerable than men’s. As companies cut costs, they have sometimes been less inclined to maintain their diversity programs, and as a result, women lose out disproportionately on job opportunities. While women make up just 39% of the global workforce, they accounted for 54% of job losses by mid-2020. Simultaneously, some 3.5 million mothers living with school-age children left the labor market during March and April 2020 alone. Women have been responsible (paywall) for the majority of unpaid childcare and domestic work during this time. 

The loss in the representation of women in the workforce can cause both devastating personal financial burdens and a loss for the future of our economy. Should no action be taken to combat the regressive hiring and employment practices of the past year and a half, our global GDP growth is estimated to be $1 trillion lower in 2030 than it would be if women’s unemployment tracked at the same rate as men’s in each sector. 

When women have access to executive and leadership positions, they often create new opportunities for other women to succeed. On average, businesses with female founders build teams that include 2.5 times more women, and companies with a female founder and executive hire six times more women than those led by men. Beyond demonstrating the benefits women can have on improving inclusion within workforces, these statistics are vital to remember as companies enter essential stages of recovery after the Covid-19 pandemic. 

It’s no surprise that women are great entrepreneurs, managers, leaders and executives, and as a result, businesses led by women continue to succeed at incredible rates. That said, our society’s failure to value women has not only stunted women’s career growth but the growth of our economy as a whole.

With these factors in mind, how are you supporting female entrepreneurs, executives and businesses?

To truly empower women in the workplace, employers need to create plans and actively support the advancement of their employees’ careers. This includes giving women equal pay, fair maternity leave programs, flexible work-from-home schedules and acknowledging their achievements and accomplishments. Appreciating your employees’ lives outside of work, including whether or not the women you work with are responsible for childcare, should also be taken into consideration.

When making changes to your workplace, consider diversity and representation. Employers have a responsibility to create inclusive teams across their organization, including the executive team. What’s more, speaking up and taking action against misogynist behavior in the workplace is essential to empowering women and enabling them to feel confident in having their voices heard.

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