If women-led startups outperform their male counterparts, why do we only give them 2% of investment...?

Today we’re talking about the infuriating world of investment and shining a light on women in business in honour of International Women’s day.

Despite the fact that statistics show just how successful women led business can be, investment in them is pitifully low and if we don’t change the status quo, that is probably not going to change.

This is not an anti men episode, or an ‘us vs them’ discussion it is just sharing what studies have found about the under representation and support of women led businesses.

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Transcript:

Now this is an episode that might just ruffle some feathers. Kia ora and welcome back. As you listen, please do listen to what I'm actually saying. Nowhere do I say anything against men. I am simply stating what studies that are often run by men have found. This is not one of those us versus them discussions. It's a reason that will become evident very soon. Because today we're talking about the sometimes, okay, almost always, infuriating world of investment. And we're shining a spotlight on women in business in honour of International Women's Day. International Women's Day, that time of year when we celebrate the mind-blowing achievements of women across the globe. We're talking social, cultural, economic, political feats that deserve to be blasted on every speaker around the world.

But it's also a day where we are still asked to speak for free to celebrate ourselves, which is totally baffling to me. Seriously, it's 2024 and we are still dealing with this? I only got two requests to speak for free this year, which is an improvement on last year, but the fact that it still happens, baffling. If you know me, you will know that I founded and ran a beauty company called Ethique for 10 years. I started it in my kitchen, grew it to over $100 million in sales and raised investment through angels, equity crowdfunding and private equity. Raising capital is both fun and exhausting and frustrating and exhilarating and stressful and everything in between. But I'm not going to talk about my personal money journey today, I've done that before. You can go back and see that in another episode. Today I want to talk about the disparities in investment in women. So let's start strong with a horrendous statistic that probably some of you have heard. 1.9% of all venture capital investment goes into women-founded organizations. 1.9, not even 2%. So if we pause and consider that number in the context of the billions and billions of dollars that flows through the startup ecosystem, less than 2% finds its way to businesses led by women. For women of color, it's infinitely worse, with the ventures receiving about 0.34%. Interestingly enough, mixed-gender teams receive about 8% of the total pie. So the vast, vast majority, 89% of all venture capital goes to solely male-led organizations.

By hearing that, you might assume that the money simply goes to the companies that perform the best. That's how it works, because these venture capital firms are run by analysts and financial people who look beyond things like gender and don't care about any of the rest of it. Well, no, that's not how it works. Women founders bring in 78 cents for every dollar of investment. Men only bring in 31. That's not a marginal difference. That is a fucking chasm. And it highlights the efficiency and efficacy of women-led businesses. Further studies have underscored this point, showing that women-led companies outperform all male teams by 63% and deliver a 35% greater return on investment. So you've got to wonder, why does this investment gap exist?

Well, the venture capital world is, as you'd expect, massively male-dominated. And it tends to funnel its resources towards male-dominated industries and ventures that fit a certain profile. And they often sideline ventures where women entrepreneurs typically operate. They look for things like deep tech and software, which receives the absolute majority of investment here in Aotearoa too. But it isn't actually just about industry preference, it's about bias. Plenty of research have shown that identical business pitches are received way more favourably when they are delivered by men than when they are by women. And that is when they are performed to both male and female VCs. That was a study run out of Harvard. I mean, that bias isn't surprising, but it's fucking disappointing. But it's also economically short-sighted, right? So if we look at the over-performance of women-led companies, obviously they're going to have a benefit for us as a whole.

By overlooking and undervaluing these organisations, the global economy is missing out on as much as five trillion dollars annually to GDP. That is how much we would all benefit if we simply invested equally in men and women. And of course the best bit, and why it's a benefit to everybody, is that women do tend to invest more in their communities and their families, focusing in particular on health and education, which is of course a benefit to all. So this isn't just a nice thing to do, it isn't a favour, it's the right thing to do for everybody.

But I actually think this next statistic is probably worse. So because of this gaping chasm of inequity, and yes, that's a little bit dramatic sounding, but I think it fits, there has been a big rise in VCs that are specifically pitched to fund women, which is wonderful. But yet more studies have been done and have shown that startups who receive investment from those female focused funds are penalised in future rounds. The perception seems to be that they receive the investment out of a kindness rather than merit and that misconception just further entrenches this massive funding gap. It is totally fucked. The statistics in the studies are absolutely clear. The underinvestment in women-led startups is not a reflection of their potential or their performance, but a systemic issue rooted in biased and weird outdated perceptions. So I have a question for you. How many of you out there assume that men are better with money than women? It would be the vast majority of us, right? It's just this weird baked-in assumption we have, but we'd all be wrong.

40% of women have a rainy day fund versus just 25% of men. And remember, statistically, women earn less. Women are twice as likely to invest in property than men. And that's quite surprising considering really there's only been a conversation that started happening relatively recently. In general, women actually spend less than men. This is talking single men and women, so without families. And that is so counter to the narrative that is spun, right? That is women are shopaholics and we spend money on frivolous things like makeup and hair. That is food for thought. Now obviously I talk the most about business that is done better, and this is why I'm especially interested in this. Beyond that it's the right thing to do for everybody, this dramatically impacts social enterprises or for-purpose enterprises, whatever you want to call them. Because these ethical enterprises, women are much more likely to start a business that has a purpose beyond making money. And these ethical enterprises are about creating positive change, making the world a better place, as lame as that sounds. So naturally these ventures started by women are more likely to struggle for funding and as a result ethical enterprises struggle to get off the ground more so. So we lose out on all that innovation all of that drive to solve the social and environmental problems that are massively pressing.

So at this point you're a female founder and you're lying on the floor staring at the ceiling thinking what is the point? I have some good news and some advice for all of us as to how to combat this problem. There are plenty of women who have raised money in both conventional and less conventional ways and have massive business success. You are listening to one of them. And if you want to hear that funding story, as I mentioned, there is another video about it that you can go and watch.

But how can you increase your chances of securing investment? It's a bit of strategy, a bit of understanding the landscape, and I guess playing the game. But you can change the rules a wee bit. Let's start with the worst bit, networking. It's not about just who you know, it's also who knows you. So you need to build a network, and if that fills you with dread, yeah, well, me too.

Go listen to the podcast I did about personal branding, because this will give you an idea of how to go about doing this without having to attend every fricking event you're ever invited to. But you do need to build a network. You should go to industry events. You should join forums and groups like the Sustainable Business Network, for example. You should participate in communities where investors are looking for the next big thing. So in Aotearoa, talking to people like the Angel Association Network well in advance or Icehouse, they know people who know people and you want them to know you. So make your project known but be really genuine about it. Build relationships first because that's the key to networking. It's not a transactional relationship, it's a relationship relationship. It's not about who can do what for you, and that's the important distinction.

When it comes to time to meet people and pitch, you need to be good. It's not often I see a good pitch, but when I do, man, do I remember them. Your pitch is not just a presentation. I kind of think that's the wrong way to look at it, right? It's a storytelling session where you need to connect emotionally and logically with your potential investors. So you need to ensure that your pitch is clear and concise and compelling. A lot of pitches, you actually leave the room without actually thoroughly understanding what it is a business does. So a good way to practice that is to test on a five-year-old. If you can explain your pitch to a five-year-old and they can tell you what your business does, job done, you've nailed it. If not, keep going until they do. You want to highlight not only the potential for profit through your organisation, you also need to talk about the societal and environmental impact. Ethical considerations are increasingly important to investors, and not just those specialised impact funds, but your bog-standard investors. And when you are thinking about people to talk to, you remember that not all investors are equal, especially when it comes to understanding and valuing these ethical businesses. So you wanna research investors who have a history of backing women-led ventures, or who express a commitment to ethical and socially-minded businesses. Tailoring your approach to these investors will massively increase your chance of success and you don't have to talk to every single person you've ever met. Remember what I said about those women-led funds and the future potential for investment?

Bear it in mind, but don't let it worry you. If they are offering you investment, don't let that put you off, because if you have success in those early years and then you need to go out and do a raise later, that success should still speak for itself. It's when you raise investment on totally ridiculous forecasts, which so many startups do, and then they underperform and have to do another raise. That's when these sorts of things start to become a problem and unfortunately that is too common a reality. Also don't forget to look out for incubator and accelerator programs. There are a lot focused on underrepresented groups like women. They are super helpful. They offer a blend of funding and mentorship and education, so they will help you scale. They also introduce you to big networks. But at the end of the day, whilst that advice might be marginally helpful, it is not up to us as female founders to fix this broken bias system. It's up to all of us. As one of my favourite sayings goes, it's not my fault but it is my responsibility. And every single one of us will benefit if we change this narrative. And that is the single best thing we can do. Change the perception that women aren't good leaders because statistically we outperform men. Challenges the perception that we don't start good businesses or that we're bad with money. And that is down to all of us because we all harbour biases in some way or other learned from the world around us. There is no shame in admitting that, yes, actually, I do have that bias, but I'm gonna actively work on it. And again, just to remind you, this is not a man-hating subject. This is about levelling the playing field for the benefit of everybody.

So, how do we change this narrative? Number one, it's the easiest one to do, is we highlight success stories and celebrate the financial success of women entrepreneurs. Talk about them to your friends and family, share them on social media and LinkedIn, highlight them. Sharing these successful stories will inspire other women, but it also helps change the perception in everybody's minds about women's roles and capabilities in business. So if you want to practice the example, next time someone asks you to think of someone who inspires you, think of a woman. If you go and read a lot of these columns, whoever is answering, they usually respond with men. Let's try and stop that. And even better, think of women of colour. They are dramatically underrepresented and it is only through talking about them that we will change this. Support women-lead businesses. This is obviously a no-brainer. We have all of the power as consumers and I guess we forget that at times. These businesses wouldn't exist without our dollar. So use your power. Seek out women-led businesses and support them. And then spread the word. If you're up for it, advocate for policy change. Encourage the not-for-profit and public sectors to back policies that support early-stage female entrepreneurs.

So that can be things like tax incentives for investing in women-led startups. It can be grants for women-owned businesses, programs aimed at developing entrepreneurial skills amongst women, it can be many, many things. Those are just some examples. You want to engage in conversations with people that educate about the economic and social value that women entrepreneurs bring to the table. So there's things like workshops and webinars and panel discussions can be effective platforms to get this message across, to challenge these outdated stereotypes. Learn from them and then share what you learn. This one is particularly hard because I was raised by English parents and we didn't talk about money. I was actively encouraged not to talk about money for most of my life. So I find this very difficult. I find it icky and awkward, but that is stupid bullshit that we have been taught by society not to do because it maintains the power balance in the people who pay us. So I want you to encourage women to speak openly about their financial success. You don't have to go around telling everyone you're a multimillionaire and you're all this and you're wonderful like those biz bros. But talk about your success. Share what you've done that's made you financially successful. I challenged myself on this episode to say that I'm a multi-millionaire and here I am saying it and I feel bloody stupid but I cannot give you this advice if I don't follow it myself. There is no shame in sharing your success and the more women that do it, the more we will challenge the stereotype that women aren't successful. This is another tricky one, but it becomes easier with practice. Actively challenge biases in your professional and personal circles. So if you notice that someone's underestimating women's business acumen or financial success, they're making a joke, speak up. Correcting these misconceptions, making it clear that these jokes aren't acceptable or correct or fair, is how you change the conversation. And yeah, it can be really fucking awkward, I get that. But the more we do it, the easier it gets. And the less acceptable those sorts of things become. That is the only way we have ever changed anything, is by talking about it. And finally, if you are more established in your business or your career, you should consider mentoring. Both men and women should consider mentoring women entrepreneurs. Mentorship is life-changing, and I can attest to that not just being for the mentee. I have learned so much from everybody in the Business But Better Mentorship Program, and others I have worked with.

It has absolutely changed my life. Mentorship is incredibly beneficial for both parties. It can change the life of the people you mentor. Now, remember every successful women entrepreneur who secures investment not only paves the way for her business, but also for the countless others following in her footsteps. I can already read and hear the comments saying, but this is unfair to men.

Of course it isn't. Men are already considered the leaders in the business world despite evidence proving that women are as good if not better than. All we're asking to do is level the playing field and invest in women as much as we invest in men. Now it's over to you. I do encourage you to join the conversation, engage in respectful factual discussion and don't call people names because the moment this gets personal we lose the discussion. But most importantly support the women entrepreneurs you know. Buy from them, support them, share them. Every time you do I actually promise you it really makes a difference. And on that note, don't forget to share this episode far and wide because I'm hoping that this is the kind of thing that starts the spark of conversation. I had a stuff column last week all about this if you prefer to read about it, I'll pop it below. But let's get more people talking about this, well beyond International Women's Day. I think people will be surprised at these statistics. Look out below for references on what I've talked about and I hope it has been informative. Don't forget to subscribe and I will see you next week.

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