by Monica Dodi, Managing Director of the Women’s Venture Capital Fund
Recently, there have been numerous research studies by McKinsey, the Boston Consulting Group, the Kaufman Foundation, Dow Jones and the National Center for Women in Technology that have shown that gender diversity significantly increases profitability, productivity and return on investment.
- Higher Innovation: Gender diverse teams produce stronger patent protection for intellectual property (NCWIT)
- Higher Productivity: Gender diverse teams outperform teams with only high achievers (NCWIT)
- Higher Valuations and Profitability: Gender diverse teams have 62% probability of greater valuations (McKinsey)
- Higher Intelligence: Collective intelligence rises when teams include more women (Harvard Business School, MIT, Carnegie Mellon, Union College)
- Higher Startup Success: High correlation between startup success and female management (Dow Jones Women at Wheel)
Nonetheless, over 90 percent of venture capital investments in the US go to all male teams! This is an almost unbelievable number because intuitively we know that diversity of any kind allows for better decision making and risk mitigation. Companies succeed when different perspectives are incorporated in their strategies.
My partners at the Women’s Venture Capital Fund and I view this market inefficiency as a unique investment opportunity, not only to deliver high returns, but also to support overlooked, high potential women entrepreneurs. Personally, I have been involved in four successful startups, including as cofounder of MTV Europe and CEO of AOL’s Entertainment brand. After a stint as entrepreneur-in-residence for Softbank Technology Ventures, I decided to work as an angel investor with seed-stage companies.
More often than not, I was the only woman in the room with other angel investors. Digging deeper into the data, I was amazed at the lack of gender diversity in these highly innovative companies that were getting much needed growth capital. Even though women start businesses at twice the rate of men, their access to capital has been very limited.
At the Women’s Venture Capital Fund, we believe that by focusing on gender diverse teams we can invest in early-stage companies that are more sensitive to the needs and desires of the female demographic which controls over 70 percent of consumer dollars worldwide and is projected to create 70 percent of the global growth in income over the next five years, larger than Brazil, Russia, India and China combined! Further data indicates that the worldwide female demographic is largely disappointed with the goods and services that are available to them.
According to the McKinsey study “Women Matter”, “Companies are failing to meet the needs of women in five key ways: Poor product design and customization for women; clumsy sales and marketing; inability to address the need for time-saving solutions; inability to provide a meaningful hook and differentiation, and failure to develop community.”
We have been very encouraged to see the large number of women who want to pursue entrepreneurism as a career path, either straight out of the university or mid-career, and have the requisite skills set to bring their ideas to fruition. Often times, they have identified products and services targeted to this important female demographic. And given recent technological advances, it is much less expensive to start a company than ever before, particularly in all things digital. With advent of the Cloud, social media and mobile, achieving market traction on a global scale for new products and services has never been so economical or speedy!
But, a word of advice - For any entrepreneur, it is important to keep in mind that we have always been laughed at – at least in the beginning of the product cycle. People laughed at the airplane, the radio, the telephone, the automobile, not to mention organic products and Facebook. When we started MTV in Europe, everyone said that there were already music videos available. When we started AOL Content brands, everyone said, “Why would anyone want to go on a computer for content”? It is part of being an entrepreneur and you will need to accept that people will need to be educated.
I have been fortunate to be involved in early stage companies throughout my career. It is incredibly satisfying to build a company from the ground up and see the results of your labors – both professionally and financially. The necessity of teamwork and being able to pivot on your business strategy keeps things exciting – and flexible. Compared to large corporations with specific rules and hierarchy structures, I found startups to be easier for a working mother’s schedule. As a startup is typically 24/7 and a very close environment, no one complains if you have to go to meeting with your child’s teacher or home to dinner with your family as they know you (and they) are on top of the priorities and will get things done! I cannot even count the times I rushed home for dinner and then hit the computer after the kids were in bed. Also, we help each other given limited resources and we interchange jobs depending on what’s needed and who’s going where in the world.
My advice to female entrepreneurs is to show up and speak up! You are part of a team that counts on you. It is far worse to be shy and not share, than to engage and be engaged. In fact, if you do not participate, why are you there to begin with? And, it is okay to make a decent living and not be ashamed of wanting to create financial independence for yourself and your family. In fact, women reinvest in their communities and create jobs much more than men.
Finally, it is important to note that not all entrepreneurs need outside capital to get going and build a business. My parents were immigrants to America and started their own businesses. We had a good life and they were their own bosses. They never needed outside capital as they were in services and built a strong clientele by virtue of their drive, hunger and hard work.
Being an entrepreneur to me simply means that you are creating a new enterprise and being your own boss. However, if you want to scale and grow, then it will be up to you to source the necessary capital. And, if it has potential to be big, then you should be able to start with angel investors, friends and family. Afterwards, you can look to institutional sources to grow and scale your business, either through equity or debt. These investors will invariably want some kind of return on their investment. Therefore, you will either have to pay interest on loans, sell your business or go public - something to think about.