Data Show that Gender-Inclusive Founding Teams Have Greater Success in Fundraising and Innovation

Bottom Line: This analysis finds that female-led startups raise more capital from investors than all-male ones. This female outperformance holds for both founders and CEOs. It holds from the first round of funding to the last, with women-led startups raising millions more and the difference growing larger as companies continue to grow and raise further rounds of capital.

Several studies have pointed to diversity’s net positive impact on a startup’s success. This is especially true for women in senior leadership roles. McKinsey, Bank of America, and Boston Consulting Group have noted these themes. BCG found, “For every dollar of funding, [startups founded and co-founded by women] generated 78 cents, while male-founded startups generated less than half that—just 31 cents."

Yet the gender disparity in startups remains. Though the gender disparity of founders in startup firms has been incrementally decreasing in the last two decades, it’s far from an even split. The percentage of women-founded companies has grown from a low of 4% in 2001 to 21.6% in 2018. There is a higher percentage of women founders in some regions than others, with 18% of companies in the Northeast having at least one woman founder, but just 12% in the Southwest.

Studies show that founders are more likely to hire people who are culturally similar to themselves. That means that without more women in charge of the hiring process, it can be difficult for other women to become part of growing industries. Data showing that women-led firms perform better than their all-male counterparts may help more women enjoy career success.

This analysis finds that startups with at least one woman founder have in fact raised more money at similar investment stages than their male-only counterparts. This pattern also holds true for startups that have at least one female C-level executive. In an analysis of Series D funding, female-founded firms outearned their male counterparts $25 million to $20 million on average. And firms with female CEOs outearned their male counterparts by $23 million to $15 million. 

From the first round of funding to the last, companies with at least one woman founder were able to raise millions more than companies without any women founders, with the difference growing larger as companies continued to grow and raise further rounds of capital.

There are two likely reasons for this female earnings outperformance:  

1. A more gender diverse team may pursue projects that a homogeneous, male-dominated startup might not consider. The homogeneous team would miss potential opportunities due to its inability to conceive an alternative perspective.
   
   
2. Since women have been underrepresented in startup leadership positions for so long, the diverse approaches they bring to a team can create asymmetrically positive returns in comparison to more traditionally male-dominated teams.
   
   

Read the full study HERE.