Entrepreneurs

Six Ways Female Start-Up Founders Succeed: New Research

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Encouraging new research from Lakshmi Balachandra, assistant professor in entrepreneurship at Babson College near Boston, reported by Janelle Nanos of the Boston Globe, identifies six tips from successful female entrepreneurs. Balachandra notes that after publishing several research reports on how little venture funding women raised between 2012 and 2014—only 183 women’s start-ups out of 6,517 companies received venture funding in that period—she decided to study successful women entrepreneurs. These women were successful despite

  • Not being taken seriously by the business community
  • Having their leadership abilities questioned
  • If they are mothers, being written off by potential funders who assumed they would be too busy with family concerns to succeed
  • Facing skepticism about their age as young women while young men are given the benefit of the doubt
  • Assumptions by investors that women are pursuing a business as a hobby
  • Questions about their business’s viability even when earning millions in revenue if the business is run by a woman
  • Feeling unwelcome at CEO networking events because too few or no other women are there

Nanos writes that Balachandra’s research on successful entrepreneurs, published in October 2019, included thirty successful female entrepreneurs whose business earned at least $5 million annually (with an average of $43 million a year). Balachandra reports the following sources of success for her sample:

  • Look beyond venture capital—The barriers for women seeking funding in the venture capital world remain high. For this reason, many successful female entrepreneurs seek other sources or provide their own capital from savings to maintain control of their companies. Consequently, their growth may be slower, but this can also be an advantage.
  • Take it slow—Many of the successful businesswomen in Balachandra’s study intentionally grew their companies at their own pace and did not let anyone else dictate their timetable. They reported feeling that this slower approach allowed them to establish a secure foundation for their businesses.
  • Invest in your employees—The research participants reported that building a supportive environment for their workforce as a long-term investment pays off.
  • Lift others up—Supporting other woman-owned businesses by either buying from or funding them shores up opportunities for others.
  • Create your own networks—Balachandra’s research participants acknowledged the importance of both networking with men and building their own women-centered networks. They also seek out and offer mentoring.
  • Make it personal—Women control half the total wealth in the United States and are informed consumers. Trust your own personal experiences as a consumer to inform your business.

This truly is encouraging research.

 

Photo by Andrew Neel on Unsplash

Where Are the Women Entrepreneurs?

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I grew up in a family of entrepreneurs where my mother and many of my aunts were strong businesswomen. I am also an entrepreneur, perhaps because I had female role models, and I have always wondered—why don’t more women start businesses? Claire Cain Miller of the New York Times  agrees that something is wrong with the underrepresentation of female business founders. She notes that while women make up half the workforce and earn 40–50 percent of the degrees in business, science, and engineering, fewer than 10 percent of technology startups are founded by women, and only 36 percent of all US companies are owned by women. Also, many woman-owned businesses are small, employ only the founder, and earn less revenue than businesses founded by men, according to the census data. Why are there fewer women entrepreneurs? Miller cites research reflecting the following factors:

  • Women have fewer role models.
  • People mentor and give venture capital money to people like themselves. Miller notes that this dynamic is called “homophily, or love of same.”
  • Of all venture capitalists, 91 percent are male. Most worked in investment banking, private equity, or consulting and went to the same few universities—Harvard, Stanford, or University of Pennsylvania.
  • Not surprisingly, 91 percent of venture capital-backed entrepreneurs are men. Most of them have degrees from similar colleges and worked in the same firms.
  • Women are outside of these established networks and do not get the same mentoring, contacts, or funding opportunities.
  • Women are also less likely to get management experience before trying to become entrepreneurs. Only 19 percent of top executives are women, so women are less likely to have mentors in senior leadership.
Another disturbing roadblock is that women can experience sexual harassment by venture capitalists, especially when women are raising funds for technology startups. The massive imbalance of power between women and men controlling venture capital funds means that women are often propositioned or inappropriately touched as a condition of receiving funding, jobs, or other help that they need to start businesses. They often do not receive the funding when they rebuff the sexual advance. What difference do women entrepreneurs and investors make for women and for companies? Miller cites research by Linda Bell of Barnard College showing that the gender pay gap shrinks when women are the CEOs of companies, and women are more likely to be promoted when women are the leaders. In another article, Miller  reports that when venture capital firms hire a female investing partner, the financial performance of the venture capital firm improves. While networking groups for women like Astia or women-led investment groups like Broadway Angels can help, women cannot change these lopsided dynamics without male allies fighting alongside them for these changes. Perhaps more men with daughters will be motivated to challenge the status quo. Miller cites a research paper by Gompers and Wang showing that male venture capitalists with daughters show less bias against women in making hiring and funding decisions. We need to tackle this imbalance together with conscious intentionality.   Photo courtesy of Kevin Krejc. CC by 2.0]]>