Experienced CEO and founder of How Women Lead, venture capitalist and sought-after speaker on female entrepreneurship.
In the past year, the Federal Reserve raised interest rates at 10 successive meetings, the tech industry saw massive layoffs and economists predicted the U.S. was headed toward a recession. This has left investors wondering what 2024 will look like. Perhaps more importantly, the question I keep hearing around this topic is, “Amid all this uncertainty, what is the best path toward growth in 2024?”
The good news? Morgan Stanley is predicting that in 2024, earnings-per-share growth will rebound. However, returning to business as usual and just expecting investments to rebound isn’t enough. I believe that for investors wanting to put a real strategy behind growth in 2024, one answer is clear: Consider how you can invest in and support women entrepreneurs.
Just take a look at a 2018 Boston Consulting Group report, which found that over a five-year period, companies founded or co-founded by women generated 10% higher cumulative revenue. The same report found that, because of the unique solutions women-founded companies bring to the market and the overall lack of funding, these companies often face less competition.
Furthermore, one Forbes article explained that women are “more likely to prioritize corporate social responsibility.” While profitability is important for any startup, a focus on social impact can help build a loyal customer base and attract top talent, both of which benefit a company in the long run. A focus on sustainability can also give businesses a competitive advantage that helps bring them through uncertain economic times.
It is no surprise to me that many women entrepreneurs perform so well for their investors. Despite this, there remains an egregious funding gap. So what can investors do to propel women’s entrepreneurship and seize the “trillion-dollar opportunity”?
1. Champion women pitching.
As an investor, you will hear countless pitches, but be aware, and ensure other decision-makers are aware, of how gender differences could show up in the pitch. For example, women may present more conservatively than men. Research has also found that men and women are often asked different questions when they pitch.
Create systems to reduce bias in decision-making. One simple system you could put in place is making sure at least three women are involved in all pitch sessions. Groupthink is a big culprit, but you can reduce its impact. Make sure you are making investments based on the business, not just the presenter.
2. Ensure women founders get equivalent valuations based on the true corporate value.
The valuation of a company is a significant market signal, however, research from 2018 found that women-founded companies had lower valuations than comparable companies run by men. As a VC or limited partner, you have a significant say in ensuring you give fair and unbiased valuations. Make sure you have clear guidance on valuation metrics, and have them reviewed by a diverse team to uncover how your valuations might be skewed by unconscious bias.
3. Explore innovative solutions in the market.
I find that women entrepreneurs often start businesses to solve problems they have experienced. Entrepreneur Ruby Taylor is an excellent example; it was her own financial needs that eventually led her to start her own business focused on improving generational wealth for people of color. Women founders might be creating solutions to problems you have not seen or experienced as an investor, yet the potential for a high return on investment is incredible. So ask around and learn the market for solutions that women are pitching before making investment decisions.
4. Ensure women are on the decision-making team.
An important step in supporting women entrepreneurs, championing women pitching and learning the market is adding women to your decision-making team. Not only do more diverse voices in the room help you see and analyze potential deals from a variety of angles, but they will also bring in their own lived experiences. Consider the market for people who experience menopause, for example. Adding the people who have or will experience it onto your decision team will help you streamline which goods are viable, without having to change anything major in your due diligence process.
5. Encourage founders you invest in to participate in peer-to-peer networks.
“Peer-to-peer networks encourage women to set higher aspirations for their businesses, plan for growth, and embrace innovation,” according to Boston Consulting Group. What you can do as an investor or fund manager is point women in the right direction. Have a list of two or three peer-to-peer groups relevant to your industries or sectors, and offer to connect your entrepreneurs to the people running these groups.
Women founders and entrepreneurs bolster the economy and will continue to do so. They have been underfunded in the current VC landscape, which opens up an exciting possibility for investors to make money and make a difference. VCs can take steps to better support women entrepreneurs in their pitches, hear their ideas out and learn about the market for women’s goods and services. I believe the data shows that women-founded businesses can be a smart investment, so the question is, how are you going to seize the opportunity?
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