“Why Women-Owned Startups Are a Better Bet” is a provocative title for the new study, and definitely conveys the message that female-owned startups take their investments further. According to the study, businesses founded by women “deliver higher revenue — more than twice as much per dollar invested — than those founded by men, making women-owned companies better investments for financial backers.”
BCG is a marketing consulting firm that partnered with MassChallenge, a network of global startup accelerators, to produce this research.
The two companies also found — and this isn’t surprising — there’s a significant gap in how female-owned and male-owned startups are funding, to the tune of almost $1 million on average.
Using data collected by startups that MassChallenge had worked with, the two companies reviewed five years worth of investment and revenue data.
Companies founded or cofounded by women saw average investments of $935,000, companies founded by men saw average investments of $2.1 million. But, startups founded or cofounded by women “actually performed better over time,” making 10 per cent more in total revenue over a five-year period: women-owned startups saw total revenues of $730,000 on average, compared to the $662,000 total revenue — on average — made by startups with male founders.
“In terms of how effectively companies turn a dollar of investment into a dollar of revenue, startups founded and cofounded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.” — from the study
The authors spoke with female entrepreneurs about this gap, and overwhelmingly heard that presentations with a woman at the helm receive more challenges and pushback from investors, women are less likely to “make bold projections and assumptions in their pitches,” and male investors have little familiarity with the products and services that a female-founded business may be trying to market to women and, in turn, don’t attempt to see the value.
If investors needed any more incentive to start actively investing in female-led startups, Fortune reported that the authors of the study calculated all the money that VCs could have made, had they invested equally in both the female and male-founded startups: $85 million over five years.