Startups founded by women receive less than 50% of the investment received by those founded by men, but they achieve 10% higher profits
At the beginning of June 2018, the Boston Consoulting Group and MassChallenge published a study that reveals that, based on the study of 350 companies, startups founded or co-founded by women receive an average of US $ 935,000 in investment. This figure contrasts sharply with the US $ 2.12 million investment received by startups founded by men. Based on these results, the authors of the research not only claim that the investment gap is something real, but accept that this is much greater than they initially thought it could be.
The research of BCG consultancy and the NGO MassChallenge identified three factors that have contributed to the disparity between investment in startups founded or co-founded by women and investment in startups founded by men:
In the first place, the study suggests that product presentations carried out by women tend to face biases on the part of potential investors, who assume that women do not have a handle on the relevant technical language. This goes hand in hand with the resistance of women to respond to criticism defending their position.
According to the research, the majority of women tend to accept without question the criticisms raised to their presentations, taking them as legitimate feedback. Instead, men tend to respond to the criticisms raised. According to the report, an investor commented that in most situations in which some aspect of the presentation or product of the startup founded by a man is criticized, he tends to respond stating why his position is correct.
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Second, BCG and MassChallenge find that men tend to exaggerate in their presentations more than women, who are more conservative in the projections they present to investors. In this sense, at first glance, presentations made by a man may seem more promising than those made by a woman.
Third, the research suggests that the products offered by women tend to have more to do with personal experiences with which men are not entirely familiar, which creates distance between the investor and the founder of the startup. It is necessary to see this issue from a broader perspective, because according to Crunchbase, which investigates the investment made by venture capital firms, 92% of the partners of the largest US companies that invest in startups are men.
The contrast between investment and profits
Despite the troubling difference in investing in startups, BCG and MassChallenge also report that projects founded or co-founded by women tend to generate more income than those founded exclusively by men.
The research showed that after a period of five years, startups led by women generated an average of US $ 730,000 against an average of US $ 662,000 of profits generated by startups led exclusively by men. This means that women's projects produce 10% of profits over those of men. In addition, for every dollar invested, startups led by women produce 78 cents, which contrasts sharply with the 31 cents produced by startups led exclusively by men.
According to these figures, BCG and MassChallenge conclude and recommend venture capital firms and other investors to be more aware of the prejudices present in the decision-making processes related to investing in startups. Given that investors are the most capable of generating a change in the current system, researchers recommend looking for and investing in projects with more realistic projections. This would go a little against their current strategy: invest in a good number of startups promising, being willing to lose some money in the majority, but having the possibility of obtaining large profits from one or two of the projects in which money was invested.
A second recommendation made, which researchers believe is the most important, is to start bringing more women to venture capital firms and investment groups, which they say could broaden the point of view of these firms and these groups. Also, it could mean more profits in the future.
At present, the economic gap between women and men is well documented, at least in terms of how much they earn in full-time jobs. According to a study by the National Partnership for Women & Families published in April 2018, for every dollar a man earns in the United States, a woman earns 80 cents. On average, a man with a full-time job earns US $ 51,640 annually, while a woman earns US $ 41,554, which means that there is a US $ 10,086 gap between what women and men earn in the United States.
LatinAmerican Post | Juan Diego Bogotá
Translated from “¿Lo sorprende? Los startups de mujeres reciben menos inversión, pero son más exitosos”