Building a Case for Women in Leadership
Recent studies show that including women in positions of leadership within a company is more beneficial than having all-male teams. For example, venture firm, First Round Capital, published a study after analyzing 300 companies and nearly 600 founders that revealed women outperform their male peers. Specifically, companies with a female founder performed 63 percent better than other investments with all-male founding teams. [Tweet this]
This data is exciting, but not surprising. We know the inclusion of women in the workplace allows companies to gain fresh perspectives and open up to new styles of management. For example, Forbes writes that women are more likely to “reinvest business profit in order to generate steady and profitable growth, while men are more likely to look for faster growth, possibly fueled by equity investment and a quicker exit.” Change can be difficult, but it certainly has its pay-offs.
There is an abundance of evidence building a case for the inclusion of women in leadership and proving how investment in women is beneficial for the startup industry’s long-term growth. For example, a 2012 Dow Jones “Women at the Wheel” report, which reviewed more than 15 years of venture-backed company data and executive information, found that venture-backed companies that include females as senior executives are more likely to succeed than companies with only men in charge.
Additionally, a research study which surveyed 7,280 domestic and international leaders from both public and private sectors rated women higher in 12 of the 16 competencies that define outstanding leadership. The study states, “At every level, more women were rated by their peers, their bosses, their direct reports, and their other associates as better overall leaders than their male counterparts — and the higher the level, the wider that gap grows.”
The study concluded that many stereotypes aligned with female leaders such as “developing others and building relationships, exhibiting integrity and engaging in self-development” concurred with data. Not to mention, women outscored men when it came to taking initiative and driving for results. With all of this evidence, it’s undeniable that women provide incredible value as leaders in the business and startup world.
Where Women Stand Today
With all this research and data to support the value of women in top management roles, where do women stand today?While strides have been made, there is still room for improvement.
A Washington Post article cites data that women hold less than 20 percent of board positions in the United States. These numbers are not consistent with the 2015 Forté Foundation’s study, which found that women now make up 40 percent of students at top MBA programs. Furthermore, a Catalyst study notes that women have earned more master’s degrees than men since 1987, and more doctorate degrees than men since 2006.
Women are surpassing men in terms of higher education, yet management positions in companies are not reflecting women’s successes. Many argue that the lack of diversity on boards and in leadership positions in major companies is unsustainable, and not reflective of the population at large. In the startup community, the problem may no longer lie in finding women to take on leadership roles, but may instead revolve around female founders’ ability to gain capital investment in their startup ventures.
Invest in Women
In addition to having a lack of representation in higher management, studies show that women entrepreneurs have a much more difficult time starting out than men. A study done by UC Santa Barbara sociologist Sarah Thébaud found that expectations about the success of women’s business ideas were set much lower than males’. Women could only surpass these low expectations if they had a particularly innovative or brilliant idea.
This stereotype of lack of credibility in female entrepreneurial ideas is supported by outside research and has detrimental effects on women’s ability to fund their business ideas. Sixty percent of startup funding for male entrepreneurs was raised from outside sources, such as bank loans or angel investors, compared to 48 percent for women entrepreneurs. Women entrepreneurs are recipients of just 19 percent of angel funding and even less venture capital funding.
The Atlantic cited a 2014 report by Babson College that found companies with a female CEO only received three percent of total venture capital dollars in the previous two years. This might be partially explained by the fact that women are so severely underrepresented in the investing world.
Over the past few years, CrunchBase has been studying trends concerning female founders, and this year’s report revealed an unfortunate fact. From 2009 to 2012, venture-funded companies with women founders grew eight percent; however, since 2012, growth has slowed, with only 17 percent of venture-backed startups being founded by women over the past five years.
Susan Lyne, a co-founder of BBG Ventures which is an early stage fund focused on female-founded companies, believes the issue of female founders lies in funding. She told Crunchbase, “The biggest issue is not the number of women starting companies, but the access to capital as you move up the food chain.”
Progress is Happening
Despite plateauing statistics and unfortunate trends, rest assured change is occurring.
First of all, the business world is recognizing the value of diversity. People are realizing that facilitating women in positions of power is beneficial for a company’s finances and morale.
Secondly, women are not waiting around for people to recognize their potential. Women in the business world are actively creating networks and support groups to help other women realize their ideas and empower themselves.
Forbes recently cited multiple startup accelerators that are helping women to scale their businesses and grow a supportive network within the business world. Startup accelerators are an invaluable way to grow your network and help launch entrepreneurs into the business world. Startups like Avion Ventures, MergeLane, and Women’s Startup lab have revised their accelerator model so that most of their work is done remotely in order to accommodate female founders who might have families and find it difficult to relocate to participate in an accelerator program.
There are many avenues becoming available to women investors in order to gather support and mentorship. Groups like Women Who Tech and many others are actively fostering support for women-led businesses and campaigning for recognition of female talent in the industry. As evidenced by their popular sessions at Denver Startup Week, these groups are gaining the support and momentum they need to make a difference.
Women have been pushing to have their business ideas recognized and have succeeded greatly. We should continue to support women’s growth because they have proven time and again they have what it takes to lead businesses to success.
Do you think women need more support? Share this article with a friend!
This article was originally published in April 2015 but has been republished for new understanding and clarity.
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