Start Me Up: Why Women Funding Women Entrepreneurs Works Best
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New research published in the Harvard Business Review reveals that female entrepreneurs are more successful when their start-ups are funded by female venture capitalists.
Sahil Raina, assistant professor of finance at the Alberta School of Business writes: ”With startups financed by all-male VCs, there is a whopping 25 percentage-point difference in the exits of female-led and male-led startups. Yet when startups are financed by VCs with female partners, that difference disappears. There is no meaningful difference in the success rates of female- and male-led startups when they’re financed by VCs with women partners.”
Raina continues, “These findings suggest that, somehow, VCs with female partners are better able to evaluate or advise female-led startups, or both, to the point that there’s no performance gap between startups led by women and those led by men. However, if female entrepreneurs get their funding from VCs solely led by men, their startups will be far less likely to be acquired or make it to an IPO.”
Gender matching can be one big factor in the improved performance of women entrepreneurs, he writes. It could also be that female VCs are better at advising women entrepreneurs or better at picking the winners. Still, “If the goal is to have more successful technology startups led by women, it may not be enough to simply encourage more women to start companies. A crucial step to helping more female entrepreneurs succeed may be to encourage more women to join venture capital firms.”