Why Investing in Women-Owned Startup Ecosystem Gives Highest Return on Investment
By Otori Emmanuel
Establishing a new business is not an easy feat as it cannot be compared with a prosperous one that has been in existence. Irrespective of the industry, every startup is likely to go through the same process of development except for variance in time. Subject to certain factors, the speed in growth of startup businesses differs, ranging from hiring the right team to maintaining the right customer base.
Forming the right team is critical in businesses, especially startups. Over the years, most businesses have been prejudiced in their workforce selection as they fit only men in management and relegate women to menial and insignificant roles.
On the movement of gender equality, women have been elevated to managerial levels lately except for a few that still hold the notion that gender matters in operation.
Great, we are having women-owned startups rising except for some constraints which are affecting their speedy growth. Most times, these constraints depend on the region of the startup, hence the counsel to set up businesses in environments favourable to it.
The issue of expectation from society to take up tasks or run the business in a masculine way affects startups. If not handled through the approach of “men”, societies usually do not support them unknowing that various businesses need different approaches, i.e. not all businesses are run the same way.
During the covid-19 outbreak, several firms incurred losses, likewise, female proprietors were hit hard. Women-owned startups received a significant drop in financing in 2020. Though not everyone’s firm suffered equally, the share of “dollars to women founders” fell drastically by 0.5% from 2019 to 2020.
Investors have more faith in men-owned businesses than women because they believe men have been in the business of managing enterprises and so are skilled. This withdraws them from funding women-owned businesses. Also, society believes women are prone to exaggerating their estimate when given the opportunity though this seems unfounded.
Female financing would get better by the increase of female investors in the system. On the side of investors, venture capitalists are usually discriminatory when it comes to backing women entrepreneurs.
Women have innovative ideas, but in a male-dominated corporate world, it can be hard to find the right mentors or connections. Mentorship and networking opportunities tailored for women founders have been limited except in mid-2021 and early 2022 where companies and institutions have taken it up to train women to skill in directorate affairs.
Entrepreneurs typically do not start a business until they are in their late 20s, about the same time as women begin their families, and combining both responsibilities is a challenging feat. Also, in society today, when a woman can take care of herself, raising a family becomes a thought. This aspect is inevitable and has stayed intact over the years.
Regardless of possible constraints to supporting women, there are still tangible reasons to invest in women-owned startups.
- Startups are delicate, they need vigour fueled into the business to keep through the growing stage which is usually not an easy one. By nature, the emotional IQ of women is such that it is resilient. Women are meticulous beings and have the ability to multitask. These qualities keep businesses going and productive; investors are usually drawn to progressive startups.
- As the business progresses, operations begin to level up, ideas start to take root, some even take a new turn. This calls for flexibility and women are wired to be adaptable. Apparently, it fits the gender personality and such business would thrive in her custody.
- Women are good at yielding returns for a business as research has proved that businesses established by females turn in more revenue than male founding businesses. According to research, women have a better understanding of unmet needs and so know how to channel the products and services to the right target of a business opening up huge business prospects. Other researches back this up women-owned businesses return twice as much as the dollar invested, companies with female leadership have a nearly 3% greater return on equity.
- On the argument of balancing work and family life, most women entrepreneurs have found solutions to balancing the responsibilities from these ends. This is not a challenge in giving her expertise to the best of the business which in return gains the support of venture capitalists.
The prosperity of businesses affects the industry which indirectly contributes to the development of the economy. Gender disparity should not be a barrier to harnessing the best a business can while in operation.