The Next Billion Dollar Startups Will Be Led By Women

Kylie Jenner is set to become the world’s youngest billionaire. At 21, Forbes estimates that her cosmetics line is valued at $800 million.

Jenner launched her company with $250,000 that she made from modeling gigs. Some critics argue that her successful company, which has sold more than $630 million in product, is only due to her fame. I call hogwash! Sure, like many celebrities, Jenner used her privilege and fame to sell her products, but many of those other celebrity businesses crashed and burned. Not Kylie Cosmetics. She had the vision to create a niche product (lip kits) targeted to a teen audience, and they loved it. For the past two years this entrepreneur has worked her butt off to build a company that’s on track to become a billion dollar business, and not one investor will have a piece of that pie.

In Jenner’s case, she did not need the funding. But for most entrepreneurs, they need capital to scale. And for women founders, the funding is scarce. Last year, $84 billion of VC investment went to startups. But only 2.7% of that funding went to women-led companies, according to Fortune. Further, for women of color, especially in tech startups, the stats are far more dismal. Only .0006% of the $424.7 billion in total tech venture funding raised since 2009 has gone to black women founders, according to ProjectDiane.

If investors want to make a big bet on their next investment and generate billions in returns, they need to start being intentional and investing in startups led by diverse founders who are trying to solve the world’s toughest problems. Let me explain why.

Right now the startup world is stuck in a rut. As the founder of Women Who Tech, I’ve reviewed and heard thousands of pitches from entrepreneurs globally through our Women Startup Challenges, serving on the jury for other pitch events, and meeting with startups. The concerning trend that I’ve seen play out like a broken record, year after year, is investors making big bets on the same kind of people (straight white men who primarily went to Ivy league schools) who are creating similar products to one another.

I believe the key to unlocking innovation and making billions of dollars is to start tapping into the startups who have their finger on the pulse of different perspectives and who can also reach and sell to broader target markets than straight white men can. And this prediction isn’t just based on personal observations. There’s a big business case for it backed by plenty of data.

Founding teams that include a woman outperform their all-male peers by 63%, according to First Round Capital who compared the performance data in their portfolio over 10-years.

Kevin O’Leary, the snarky investor on Shark Tank, shared similar data, outlining that the companies in his portfolio which tend to generate the most returns are led by women. Of the 32 companies in his portfolio—with sales between $5 million and $300 million annually— 52% were run by women.

Further, startups founded and co-founded by women are significantly better financial investments, according to research by Boston Consulting Group and MassChallenge, a global network of accelerators. Research explained that “for every dollar of funding, these [women-led] startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.”
Women CEOs in the Fortune 1000 drove three times the returns as S&P 500 enterprises run predominantly by men.
Venture-backed, women-led tech firms bring in 12% higher revenue than male-owned tech firms, according to research by the Kauffman Foundation.

Venture firms that invested in women-led businesses had more positive performances than firms that did not, as determined by a study conducted by the Small Business Association.
Black women’s business ownership is the fastest growing among all women.
Women-led companies are more capital efficient and achieve a lot more with much leaner resources. “Women entrepreneurs bring in 20% more revenue with 50% less money invested” than their male counterparts, according to research from the Kauffman Foundation.

The bottom line? If investors want to find their next Mark Zuckerberg, they better start betting on women founders.

https://www.forbes.com/sites/allysonkapin/2018/07/19/the-next-billion-dollar-startups-will-be-led-by-women/

Comments are closed.