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Why Women-Owned Companies Succeed

In the last few decades, the role of women in the workplace has changed dramatically. In 1950, roughly 30% of women were participants in the workforce. Fast forward fifty years, and that percentage has increased to almost 50%. Women now have seats at some of the most important tables, and women-owned businesses have become the norm.

That being said, there are still stark gendered differences in business performance. In short, women continue to be underestimated at many junctures in their careers. Despite harmful and incorrect stereotypes, companies founded and operated by women tend to outperform their projections, as well as outperform those started by men.

Here are the top reasons why women-owned businesses succeed, and what you need to know about the current market.

Women Are Undervalued

According to a comprehensive study of hundreds of companies conducted by Boston Consulting Group, startups that are founded or cofounded by women receive less than 50%, on average, of the venture capital funding that companies founded by men receive.

According to the data, women-owned companies receive only 4.4% of venture deals, which amounts to only 2% of the total venture capital funding. To be sure, these data also control for variables such as education level and quality of the pitch itself.

These metrics show that despite the crucial role of women in the workforce, they continue to be undervalued by investors.

Women Generally Deliver Better Results

One who is misinformed might retort that women-owned businesses are less likely to be funded because their ideas are of lower quality. They might also wrongfully assert that women-owned businesses are less likely to actually succeed.

Wrong again.

In fact, despite receiving less than half the funding, women-owned businesses generate more revenue on average than those founded by men. The average company founded or cofounded by women generates $730,000, compared to $662,000 for male-founded companies – and again, with fewer resources.

That amounts to women-owned companies producing 78 cents per dollar invested, and male-owned companies producing just 31 cents.

These results are independent of the amounts invested. In other words, women more than account for the unequal playing field on which they start their businesses.

The reasons for the disparity likely include that women’s presentations are more likely to receive pushback. Men are more likely to overstate projections and oversell their ideas.

Women Draw From Experience

Thirdly, and most importantly, women tend to have a strong grasp of what their target market wants. Many male investors have little to no familiarity with products and services marketed specifically to women, so their invested dollars are easily misallocated. Over 90% of venture capital investors are men, so their judgment of which women-based ideas have the most merit cannot possibly be accurate.

Women also derive their business ideas from experience in order to better address the need in the market. Men are less likely to do so, relying on intuition and projections. Since many new products cater to women, those startups that have women in leadership roles have a higher chance of succeeding.

TalentSpark – A Proud Women-Owned Business

At TalentSpark, we are proud of our heritage. Our partners have a firm grasp of the Idaho recruiting market from years of experience. We are confident we can serve your team’s needs. If you are looking to hire great finance or accounting leadership, look no further than the search professionals at TalentSpark. We pride ourselves on being Idaho’s premier recruiting firm. Our team will work with you to find the candidate that fits your company’s unique preferences and culture. Check out www.talentspark.com to learn more about how we can help you quickly propel your firm to the next level.