Businesses founded by women tend to deliver higher revenue on the whole, thus it has been argued that women-owned companies are better for financial backers.
The Boston Consulting Group joined with MassChallenge, seeking to determine how companies founded by women differ from those founded by men. The data found that women do not get the same level of financial-backing as men.
Around 42% of MassChallenge-accelerated businesses have at least one female founder. In America, the average investments in female-led companies were $935,000 as opposed to $2.1 million. Despite this, women tend to generate 10% more cumulative revenue over 5 years than men.
In establishing why women founders, despite doing better financially, have a problem with funding, it was found that they and their presentations are subject to challenges and pushback – for example being asked to show they have basic technical knowledge. As well, women can be more conservative in their projections and ask for less than men. Male investors also have little familiarity with the products and services women-founded businesses market to other women.
From these, there were recommendations made in order to improve investments in female-led businesses. Venture Capital (VC) firms and other investors should seek to look for realistic projections from businesses rather than bias for familiar products and understand that women-owned companies are promising opportunities.
Startup accelerators should make sure they have a balanced slate of applicants and coach female entrepreneurs on connecting with market realities.
The study also recommends that female entrepreneurs seek coaches who can offer feedback and help practice. By following these recommendations, the hope is to close the gap and offer better support for women-owned businesses.