Why Invest In Women-Led Startups?

We can all take part in unlocking women’s economic potential.

Women Led Startups

What’s going on here?

The number of female-owned businesses is rising fast, and both finance gurus and politicians are saying that this important sector is driving economic growth across the globe.

According to the venture capitalists First Round Capital, their female-founded companies are out-performing male ones by 63%. And a study by America’s Small Business Association found that investment firms that backed women-led businesses performed better than those that didn’t.

But while women’s businesses are thriving, it’s often hard for them to get venture capital funding to develop their companies, and that’s because old (sexist) habits die hard. Sad to say, but most venture capitalists are men, and they feel most comfortable giving money to those in their own network. And that’s going to be other men. Research also shows that when women pitch business ideas outside of the traditional “mummy commerce” remit (things to do with children and fashion), men don’t take them seriously.

Why is this a problem?

Women are amazing at running businesses and need more support. One prominent US angel investor, David Nethero of Golden Seeds, says he thinks women often come up with better business ideas in the first place, because while men might be seduced by the potential of flashy new technology, women look closer to home for real problems that real people need solutions to: the simple ideas that will give a business profit and longevity.

Women also typically come to entrepreneurship later in life than men, maybe after a career break, which means they tend to have a solid background in industry behind them. They have what it takes to weather the blows of business ownership. Yet many venture capital and angel investors are still wary of women’s businesses. We guess that a dose of truth serum would have them admit that they think these businesses are just hobbies for bored wives, or the fluffy pink dreams of someone with no real-world money sense. So everyone is losing out. Not least the very investors who think they’re safer avoiding women-led businesses!

What can you do about it?

In general terms, just by reading this article on Vestpod you do something to help, because you’re already part of the movement helping to shift the conversation around money to be less gendered.

But more specifically, now’s maybe the time to consider putting some of your savings towards a female-led start-up. Remember, it doesn’t have to be something you think sounds fun or the passion project of a good friend (see our thoughts below on investing with friends!). You’re in it to make a profit. And so are the women founders pitching to you. So treat it like you would any other investment opportunity: take it seriously, do your homework, and seek out ethical businesses who promote and nurture diverse company cultures: this shouldn’t be hard, as it’s integral to the way women tend to work.

Finally, keep pushing your own success, in the knowledge that everything you achieve will trickle down to other empower other women. For example, venture capital firms with women on the board are much more likely to invest in female-led startups. OK so you might not be a VC board member (yet…) but even on a smaller scale, the bigger and better your business - whatever it may be - the more brilliant women you can support.

And rest assured that you’re not only taking a slice of one of the fastest growing sectors of global industry, but you’re chipping away at the patriarchy too.

Read on for more specific advice about mixing business with friendship.