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
- 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.”)