WHY DOES INVESTING IN WOMEN-LED STARTUPS MAKE BUSINESS SENSE?

WHY DOES INVESTING IN WOMEN-LED STARTUPS MAKE BUSINESS SENSE?

Women

Businesswomen are becoming the future of the startup ecosystem. Therefore, if you are planning to invest in early age companies, it would be a smart choice to invest in startups or companies led by women. Women-led and women-owned companies yield above-market returns on investments. Women are aware of what they bring to the table and how their empathetic attitude contributes to the growth of every venture they associate themselves with.

WHY DOES INVESTING IN WOMEN-LED STARTUPS MAKE BUSINESS SENSE?
Credits: The Indian Wire

Here are some reasons which clearly depict that women-led startups flourish and therefore one should invest in them:

  • Businesses that solve problems

Many startup ideas get triggered via a woman’s real-life experience of dealing with a particular problem and her desire to find a solution to the problem. Over the years, we have seen the evolution of many femtech (tech products specialized for women’s health) startups tackling issues related to women’s hygiene, wellness, and health. Moreover, many women-led startups are addressing issues in fields like consumer products and services, artificial intelligence, cybersecurity, and others. Women entrepreneurs don’t just stop at solving the problem, but rather make sure that the solution they come up with is cost-effective and time & resource-efficient.

  • High emotional intelligence

Emotional intelligence (EQ) is the ability to manage feelings and empathize with others. Women have high emotional intelligence which helps them manage their team better. They lead with a transformational leadership style (a style that encourages, motivates, and inspires employees to realize overall success). Their empathetic nature nurtures a positive working environment in a company. All these factors impact the overall growth and performance of emerging startups. 

  • Focus on Long term goals

Women in business focus more on long term financial gain rather than short term profits. They are less concerned about money. Their businesses are guided by market needs and long term plans. They see rejections as opportunities to improve their business models, preserve and look for customer validation, and learn from global competitors. Their extraordinary skills in visualizing the ideal future help them achieve exceptional results in business. 

  • Creation of a Diverse workforce

Women founders create diverse workforces and company cultures. Employees at women-led companies are more positive about relating to their company’s strategy, mission, vision, and values, and its ability to communicate on these topics. Women-led company cultures tend to be inclusive, consultative, and collaborative. Investing in smart, intelligent, and driven entrepreneurs and the companies they are growing would be a smart decision to make. 

According to research conducted by Boston Consulting Group, startups cofounded by women are better financial investments. The research says, “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.”

THE WORLD NEEDS MORE WOMEN IN THE STARTUP WORLD

Women have proved themselves that they are capable of handling and managing high profile jobs. Unfortunately, they are still at bay when it comes to innovation and entrepreneurship but the world needs more women in the startup world due to the below-mentioned reasons: 

  • Women are multi-taskers. They have a calmer approach and the power to juggle several tasks at once. 
  • They have the unique tendency to build, maintain, and nurture long term relationships. 
  • They work well under pressure and come up with unique solutions.
  • Women are fair negotiators. They enter into a negotiation with a win/win attitude.
  • They are better at getting to the point. They will take a few moments of pleasantries, then it’s down to business.

THE BIASNESS IN THE VENTURE CAPITAL INDUSTRY

Women who venture into the entrepreneurial world do not get a fair deal due to the biasness in the VC industry which is preventing funds from being allocated to the best investment opportunities. The discriminatory belief of VCs regarding women entrepreneurs is leading to women getting fewer funds. The venture capital industry is highly dominated by men who are more inclined to invest in things they are familiar with and can relate to. For most men, those things don’t include women-led startups. 

THE POSSIBLE SOLUTION

The solution is not for Venture capitalists to suddenly start investing in startups simply because they are founded by women. There is a need to weed out the institutional patterns and thinking that prevent VC firms from recognizing the great potential of ideas presented by women in business.

Also Read: How to check the financial health of your business?

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