In the current climate of uncertain economic conditions, venture and PE capital markets at a standstill, Unicorn companies with no profits, banks collapsing, and The Great Resignation, we need to find better, more sustainable business models. Period.
Research has shown that women-led companies drive economic growth and deliver social change while producing better returns. According to Marime-Ball and Shaber (2022, June 21), in their book “The XX Edge: Unlocking Higher Returns and Lower Risk”, they note that “women-led companies offer higher returns with lower risk” and that women tend to be more risk-averse than men, which can lead to more prudent decision-making and a focus on long-term sustainability. As a result, women-led companies tend to have lower debt, higher profits, and better shareholder returns.
Sustainable economic growth is driven by profit and the distribution of profits back into the economy through purchasing power. While capital is a necessary component of running a business and accelerating growth, women are more prudent with capital and build companies with higher profits versus the flashy Unicorns of Silicon Valley, many of which have never made a profit.
Women entrepreneurs are also driving social and environmental impact through their businesses. Many women-owned businesses are addressing issues such as climate change, social inequality, and access to education and healthcare. By doing so, they are not only creating value for their stakeholders but also contributing to a more sustainable and equitable world.
And because women entrepreneurs are often driven by wanting to make an impact, the culture within their organizations is one of inclusion and diversity and focuses on employees’ well-being and growth.
This has been exactly my personal experience when working with a female founder:
- Women are naturally more conservative in how they look at finances and therefore tend to be more conservative in projections, manage cash burn more closely, and don’t spend ahead of getting funding or the next big deal;
- Women have very limited access to funding, so they are forced to figure out how to bootstrap, be more scrappy with their capital, and run their businesses more efficiently;
- Women-led businesses have diverse teams, pay equity, and lower turnover. Their teams stay because they are committed to the mission of the company and the leaders, not because of the bonus plan (which is fair but not overblown); and
- Women-led businesses have zero tolerance for harassment, bullying, racism, questionable expense reports, or disrespect in the workplace.
So how do we use women-owned businesses as a model for building better businesses in general? How do we accelerate the growth of women entrepreneurs to drive economic success and social change? Be intentional about supporting women entrepreneurs.
- Respect. First and foremost, understand that many women have had the odds stacked against them their entire careers. They were likely raised in the generation of “not being good enough” despite achievements. And many, many women are balancing running a company with running a household and a family. So when working with a female founder, respect that, despite the above, she had the courage and gumption to go out and start a business she didn’t do it for the money, but she did it because she truly believes in the problem she is trying to solve and wants to build a better company and product.
- Funding and access to capital. Despite the increasing number of women who are starting their own businesses, the funding statistics for women founders are abysmal. The statistic that is cited over and over again is that only 1.9% of venture funding has gone to female founders. There are many articles about why this is and the systemic issues within venture funding, so I’ll simply state that venture needs to evolve.
- Buy from women. When seeking vendors and service providers, source women-owned businesses. Supporting women-owned businesses drives economic growth, and women tend to invest back into women creating a rising tide.
- Fill board seats with women. Women board members bring additional perspective to the boardroom, including how to build a more sustainable business and better company culture.
- Hire, promote, and refer women. When referring business and/or hiring or promoting candidates, make sure you have at least one woman in the mix. I always have 2 or 3.
If we can create a more equitable environment for women entrepreneurs to grow their businesses, we can create a better business environment in general with more sustainable business models, more businesses focused on social impact, and more businesses with better shareholder returns. So be intentional about supporting women founders in a meaningful way.
References:
Marime-Ball, P. and Shaber, R. (2022, June 21). The XX Edge: Unlocking Higher Returns and Lower Risk. Retrieved from https://www.simonandschuster.com/books/The-XX-Edge/Patience-Marime-Ball/9781637630938
Stengel, G. (2023, April 5). Women Are The Secret To Higher Returns And Lower Risk. Forbes. Retrieved from https://www.forbes.com/sites/geristengel/2023/04/05/women-are-the-secret-to-higher-returns-and-lower-risk/?sh=71e2e1bb6ac3