Why Women-Owned Startups Are a Better Bet
June 6, 2018 By Katie Abouzahr, Frances Brooks Taplett, Matt Krentz & John Harthorne.
The gender pay gap is well documented: women make about 80 cents for every dollar that a man earns. Less well known: the gender investment gap. According to our research, when women business owners pitch their ideas to investors for early-stage capital, they receive significantly less—a disparity that averages more than $1 million—than men. Yet businesses founded by women ultimately deliver higher revenue—more than twice as much per dollar invested—than those founded by men, making women-owned companies better investments for financial backers.
Businesses founded by women ultimately deliver higher revenue.
BCG recently partnered with MassChallenge, a US-based global network of accelerators that offers startup businesses access to mentors, industry experts, and other resources. Since its founding in 2010, MassChallenge has backed more than 1,500 businesses, which have raised more than $3 billion in funding and created more than 80,000 jobs. MassChallenge, which neither provides financial support nor takes equity in the businesses it works with, puts significant effort into supporting women entrepreneurs.
Our objective was to see how companies founded by women differ from those founded by men. Our data shows a clear gender gap in new-business funding. We also spoke with investors and women business owners to get a sense of how they perceive the funding status quo. Our findings have clear implications for investors, startup accelerators, and women entrepreneurs seeking backers.
One might think that gender plays no role in the realm of investing in early-stage companies. Investors make calculated decisions that are—or should be—based on business plans and projections. Moreover, a growing body of evidence shows that organizations with a higher percentage of women in leadership roles outperform male-dominated companies. (See “How Diverse Leadership Teams Boost Innovation,” BCG article, January 2018.) Unfortunately, however, women-owned companies don’t get the same level of financial backing as those founded by men.
To determine the scope of the funding gap, BCG turned to the detailed data MassChallenge has collected on the startup organizations it has worked with. About 42% of all MassChallenge-accelerated businesses—of all types and in all locations—have had at least one female founder. Aiming to build on the growing proportion of women entrepreneurs, the availability of education and support for them, and the sizable community of women who are business experts, MassChallenge determined that it needed to learn more about how its women entrepreneurs were faring and how the program could better prepare them for future success.
In a review of five years of investment and revenue data, the gender-focused analysis showed a clear funding gap (see the exhibit).
- Investments in companies founded or cofounded by women averaged $935,000, which is less than half the average $2.1 million invested in companies founded by male entrepreneurs.
- Despite this disparity, startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period: $730,000 compared with $662,000.
- In terms of how effectively companies turn a dollar of investment into a dollar of revenue, startups founded and cofounded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.
The findings are statistically significant, and we ruled out factors that could have affected investment amounts, such as education levels of the entrepreneurs and the quality of their pitches. (See the sidebar, “A Closer Look at the Data.”)
The results, although disappointing, are not surprising. According to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital (VC) deals, and those companies have garnered only about 2% of all capital invested.
WHY THE DISPARITY?
To dig deeper, we spoke to women founders, business mentors, and investors, some of whom were not affiliated with MassChallenge. From those conversations, three explanations emerged.
One, more than men, women founders and their presentations are subject to challenges and pushback. For example, more women report being asked during their presentations to establish that they understand basic technical knowledge. And often, investors simply presume that the women founders don’t have that knowledge. One woman who cofounded a business with a male partner told us, “When I pitch with him, they always assume he knows the technology, so they ask him all the technical questions.” We heard that when they are making their pitches, women founders also hesitate to respond directly to criticism. If a potential funder makes negative comments about aspects of a woman’s pitch, rather than disagree with the investor and argue her case, she is more likely than a man to accept it as legitimate feedback. “Most guys will come back at you in those situations,” an investor said. “They’ll say, ‘You’re wrong and here’s why.’”
Two, male founders are more likely to make bold projections and assumptions in their pitches. One investor told us, “Men often overpitch and oversell.” Women, by contrast, are generally more conservative in their projections and may simply be asking for less than men.
Three, many male investors have little familiarity with the products and services that women-founded businesses market to other women. According to Crunchbase, which tracks VC funding, 92% of partners at the biggest VC firms in the US are men. “In general, women often come up with ideas that they have experience with,” one investor said. “That’s less true with men.” Many of the female interviewees told us that their offerings—in categories such as childcare or beauty—had been created on the basis of personal experience and that they had struggled to get male investors to understand the need or see the potential value of their ideas. One founder told us that this lack of understanding shows up also in terms of social class when entrepreneurs pitch products for people at socioeconomic levels significantly lower than that of the typical angel or VC investor.
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Only one thing matters. That you f#@^ing finish what you START.
This is the single most important medium post you will ever read.
I believe that I am about to change your life.
Because I want to tell you one thing.
Your work is not perfect.
Your product, your business, your blog — they are incredibly imperfect.
I could look at your work for 5 minutes and come up with so many flaws you would pay me to point them out.
But you know what?
It. Does. Not. Matter.
There is only one thing that matters in this world, and it is simple, and I want you to understand it.
The only thing that f#@^ing matters is that you finish what you’re working on.
83% of the people who will email me and say they want to do what I do WILL NEVER FINISH ANYTHING.
They will have the best excuses in the whole world. They were busy. They were tired. Life was hard. Their dogs ate their homework.
Can I tell you something? Those excuses might make them feel better but they won’t help them get to where they need to be. There is only one thing that will help with that — finishing their work.
You do not have to be faster than the tiger.
Have you ever heard that parable? A man and his friend were camping in the jungle. One night a tiger attacked their camp site. They started running. One friend said to the other, “we’re not fast enough, we’ll never outrun the tiger!”
His buddy turned to him and shouted one thing.
“I don’t have to outrun the tiger, I just have to outrun you….”
The tiger is our own will to NOT ACHIEVE. The tiger is the voice that says to give up.
The tiger is the voice of failure.
You just have to outrun everyone who doesn’t have the guts to finish their work.
I don’t care if you disagree. I don’t give a fuck.
Because at the end of the day, I finish my work. I’m a finisher. If you cannot be that and do that, you don’t stand a chance out here.
The world is waiting for you, the opportunities are out there, for the people with the raw guts to finish, to publish, to release, to launch. If you’re one of those people, you’re a goddamn legend and I respect you.
If you’re not?
Well, then I got no time for you.
Finish your work.
Put it in the hands of people who give a shit. Be a radical completer. That’s what matters and that’s what counts and anything else is bullshit.
You want to tell me all about how wrong I am? How I offended you by someone swearing and telling you the truth? Email me. [email protected]
…and I’ll explain why it doesn’t matter if I’m wrong or if I’m right.
Only one thing counts; that you’re a finisher.
So, are you?
By Jon Westenberg – Chief Empathy Officer, Creatomic
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CREDIT: Matthew Henry via StockSnap
Working from home has got a bad rap. Many people seem to think it’s a way to avoid hard work by getting out from under management’s watchful eyes. Indeed, few pundits seemed to object when Yahoo, IBM, and Aetna rolled back their work-from-home policies.
Indeed, working from home seems like heresy if believe in the “collaborative, innovativeworkplace” idea, or (as I call it) the “let’s-force-everyone-to-work-in-an-office-that-looks-like-a-hotel-lobby-from-outer-space” management fad.
Well, the Open-Plan Office Nazis have it all wrong, according to Stanford Professor of Economics Nicholas Bloom. (Kudos to Qz.com for calling my attention to Bloom’s incredibly entertaining TED Talk.)
In his TED Talk, Bloom explains that work-from-home is potentially as powerful and innovative as the driverless car. And he’s dead serious.
As evidence, Bloom cites a Singapore company where half of the staff worked from home for four days a week while the other half came into the office five days a week.
The two-year study revealed that the employees who worked from home had a “massive, massive” (Bloom’s words) increase in productivity–almost equivalent to an additional workday–primarily because of fewer distractions and fewer pointless conversations.
The work-from-home employees also tended to remain in their jobs longer, thereby decreasing employee turnover, which (of course) drains management productivity and results in an expensive loss of skills and connections when an employee quits.
Finally, the work-from-home employees were happier and therefore healthier, thereby reducing sick days and absenteeism (as well as people coming into work with contagious colds and flu), all of which decreased the company’s overall health care expenses.
The experiment was so successful that the company instituted work-from-home throughout the company, which also (as a side benefit) allowed the company to grow without adding expensive office space.
These results echo a recent Gallup study showing that employees who work from home three to four days a week are far more likely (41 percent versus 30 percent) to “feel engaged” and far less likely (48 percent versus 55 percent) to feel “not engaged” than people who report to the office each day.
So there you have it. Companies that are forcing employees to come into their glitzy but noisy and distracting open-plan offices would be much better off if they instead let their employees work from home most of the time.
To which I say: duh.
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I used to be one of those people who loved to brag about how busy he was. You know the type. Heck, you might even be one of “those” people… Until I completely burned out.
I used to be one of those people who loved to brag about how busy he was. You know the type. Heck, you might even be one of “those” people…
I would work 60, 70, sometimes 80 hours a week–it was never enough. I wore my ‘busy-ness’ like a badge of honor… I loved telling you how unbelievably hectic my life was at any given moment.
Until I completely burned out.
After years of grinding away, I realized one day that I needed to completely reevaluate what I was doing with my life, what my priorities were.
Was working 80+ hours a week really making me happy?!
It was during this period of reflection that I realized simply working longer hours wasn’t going to fill the void inside me.
I love working, don’t get me wrong. Helping people is what gets me up in the morning. But what if I could learn to work smarter, not longer? What if instead of slogging through 100 hours of work for work’s sake, I could consolidate that into as little as possible. Say, 16.7 hours per week?
It might sound crazy, but with a little trial and error, I learned to do just that. It didn’t happen overnight–we have a lot to unlearn about our habits and expectations. But here’s how I did it.
How to Manage Your Time Effectively
My life changed when I stumbled upon the Pomodoro Technique. Basically, it’s a deceptively simple time management system designed by Francesco Cirilio that helps you work with time, rather than against it.
Here are the five simple steps that make up the technique:
- Choose a single task;
- Set a timer for 25 minutes (preferably not the timer on your phone);
- Work on your task until the timer rings, then put a checkmark on a tracker;
- Take a five minute break;
- Repeat steps 1-4 three more times, followed by a 15 minute break.
You may think that doesn’t sound like much, but don’t be fooled: The Pomodoro Technique calls for 25 minutes of steady, focused work on a single task. No emails. No phone calls. No checking Facebook. No getting up for a snack. No distractions!
This takes some getting used to. I had to learn ignore all of the digital age distractions that so often occupy our time.
I found that a using a kitchen timer, setting my phone on airplane mode, and secluding myself in a quiet place produced the best results. I spent five minutes each morning planning out what I wanted to accomplish that day, and each Friday I spent 30 minutes reviewing the week and planning for the week ahead.
These tips and tricks helped me hunker down and get to work. After a while, 25 minutes of uninterrupted work came easily, and I was accomplishing what I set out to do. It was a great feeling.
Personalizing the “Pomodoro”
Well, it was a great feeling…until it wasn’t. Soon I found myself cramming as many Pomodoros into a single business day as I could, and it started having negative effects on my work and my mood. I was still working too hard.
It turns out that laser focus for 25 minutes, repeated over and over again, just doesn’t work effectively every day. Life gets in the way. It’s unpredictable, and doesn’t really care how many tasks you have on your to-do list.
So I decided to personalize the method, to give it more flexibility. I asked myself: What *actually* works best for me?
In a perfect world, I’d have eight tasks identified at the beginning of each workday, prioritized from most to least important. I would be equally motivated to work on each one, and I’d finish all of them within three hours, without interruption.
But I’m not perfect–no one is. I get tired, occasionally I get lazy, things happen that are outside of my control. No amount of focus is going to help me with that, and these are realities for everyone.
So I eased up on my expectations for myself. I focused on accomplishing 8 Pomodoros a day, five days per week. Total, that’s 125 minutes of work per day, 1,000 minutes per week or around 16.7 hours, not including breaks. It was getting better.
But something was still off. After working on my method for a while, I came to the realization that I was still too constricted. I had promised myself I would only work during normal hours–9 to 5, Monday through Friday–and spend the rest of my time enjoying my life.
But that didn’t always happen. And when I didn’t finish a set amount of Pomodoros before 5 p.m., I found myself thinking about my work and the tasks I didn’t accomplish in my “off” time, which was exactly the opposite of what the Pomodoro Technique is supposed to do.
Rather than restricting my work hours, I actually needed to expand them. So weeknights, weekends, vacations, holidays–all of those times came into play for me. I shifted to a seven-day work week, and began working when it suited me, rather than forcing my time to suit my work.
More importantly, opening my working time allowed me to do non-work stuff during normal “work” hours, like attend my daughter’s recital. It actually gave me more freedom, not less.
And that’s how I went from spending 40 to 45 hours a week fitting in my 40 Pomodoros, to having 168 hours each week. Since I only need 16.7 hours net, that means I only work 10% of my time. And it’s made all the difference.
How to Get Started
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I love this post from the Buffer co-founders open.buffer.com), I have personally experienced consistent doubling in team sizes in nearly every tech startup i have either founded or guided and its a dynamic that if managed well will ensure your success, failure is messy and painful. So read on, regards Bradley Birchall …
The Buffer team is more than 65 people right now, which means our startup has more than doubled in size this year. It’s been an incredibly exciting adventure!
The Buffer team is more than 65 people right now, which means our startup has more than doubled in size this year.
It’s been an incredibly exciting adventure!
There are a lot of big factors for this growth, as well as many changes for all of us that have gone along with it.
We recently sat down for a video chat with Buffer: Open’s Content Crafter, Courtney, to talk about why and how we’ve grown so much this year. She asked us some great and tough questions about things like the challenges of growth and scaling our culture, how big Buffer could possibly become and lots more. We wanted to share it all with you here!
In this post we’d love to highlight just a few of the things we talked about in the video and invite you to share any thoughts this brings up for you!
Why is Buffer growing so fast right now?
Our experiment with self management was an exciting time, but during it we began to notice that we hadn’t grown very much.
When we noticed that from one retreat to the next we had almost the same amount of people, that didn’t feel too ideal.
We realized that there’s so much more that we want to do; so much opportunity. We weren’t moving as fast as we wanted to, and that was a big trigger point.
Luckily, we were also growing in revenue, and had started to hit profitability.
We decided to reinvest that, thinking that ideally we should keep growing and make use of that money to provide a better product and better customer service.
As a result, we have a different situation leading up to our upcoming retreat in Hawaii in January, where we’ll almost have doubled from one retreat to the next!
How has it changed the way we work?
As we began to ramp up and grow again, we realized we had stretched our existing structure as far as we could.
We’ve never had a lot of hierarchy, especially during our self-management period. We were a small enough group that we organized naturally, for the most part, without breaking into too many specialized teams.
So when we hit 10-15 people in the product and engineering group, that was 15 people on one team. That becomes really inefficient—people are jumping from one thing to another.
The product has grown so much at 4-5 years in, and it has a much wider span. It’s hard to be able to effectively jump into all its different areas.
And ideally, you don’t want to have to split your brain between them. For people to be able to work and focus, we’ve learned that areas needs to be separate so someone can give one all their attention.
We realized that we needed to split into multiple teams—ideally, we’d have 5 people per team. So at a team size of 15 in product and engineering, that’s 3 teams.
We knew we needed more than that to handle each element of Buffer, maybe 7 or 8 teams total.
So that meant we would need to be a product and engineering team of 35 or 40! That’s what triggered this wave of growth.
The system we have now, we think, works. And yet we’re growing so fast that as soon as we hit the point where things works, we might grow to the next point and it’ll all break again.
That’s just going to be how it works now. It’s a challenge, but it’s also exciting.
How big could Buffer become?
In terms of vision, our feeling is that there’s a lot of opportunity.
We want to continue helping small businesses to have the voice they deserve to have and get more reach through social media. There are a lot of different spaces we could move into, and much more we could do to help customers with social media publishing.
The culture we’ve established and movements we’ve ended up being part of, like transparency and growing as a distributed team— we believe this is a purpose of Buffer, too, to spread these movements.
The more we can grow, the more we can show that this kind of work can scale. That’s part of the motivation for going further.
Nothing grows forever, and that’s not a good aim to have. But right now for Buffer, we think we’re far from our limit. Our growth may not always be this fast, but we will be on a pretty fast trajectory from now on.
We’ve now moved to this new structure, so we’re building up to that. Once we hit it, we probably won’t need to double every few months again—until we need a whole new structure, which could happen every few years.
How does our culture evolve as we grow?
We’ve recently started to send out periodic surveys to get a feel for how teammates are feeling at buffer, and recently the rate of growth has got quite a few people worried about the culture changing.
That’s on people’s minds, and it’s really important to talk about and think about and make changes around.
Culture evolves. Every new person we add evolves the culture—that’s why diversity is so important, because we want the culture to evolve in a diverse way.
At the same time, there is this underlying idea that you’ll have culture whether you like it or not—it’s down to whether you decide to shape it.
That’s something we’ve always believed in, and why we put our values into words when we were just 10 people. We believe we should be very deliberate about what kind of company we want to build and how we want it to feel.
The two of us used to talk about culture together. On Fridays, we would go to a coffeeshop and work on culture, make changes. Things like pair calls, the salary formula, all these things we introduced through that weekly meeting.
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