Defining the X Chromosome: the DNA of Women Led Startups
Guest post by Pemo Theodore, EZebis
Some of the amazing female entrepreneurs and venture capitalists I interviewed for this project were Cindy Gallop, IfWeRanTheWorld; Danae Ringelman, Indiegogo; Julia Hu, Lark; Leila Chirayath Janah, Samasource; Lisa Stone, Blogher; Wendy Lea, Get Satisfaction, Ann Miura-Ko, Floodgate; Catharine Merigold, Vista VC; Patricia Nakache, Trinity Ventures; Brad Feld, Foundry Group; Chris Dixon, Founder Collective; Dave McClure, 500 Startups; Fred Destin, Atlas Venture; Fred Wilson, Union Square Ventures; Guy Kawasaki, Garage Ventures; Jason Mendelson, Foundry Group; Jeff Clavier, Softtech VC; Mark Suster, GRP Partners; Neil Rimer, Index Ventures; Randy Komisar, Kleiner Perkins and Tim Draper, Draper Fisher Jurvetson. You can see the full list here. I have teamed up with Startup Genome to help get a critical mass of women to participate in the Startup Genome Project in order to add the dimension of quantitative data to the discovery of the DNA of women led startups. The Startup Genome has already learned that “approximately 70% of the startups in their dataset scaled prematurely. I am very interested to see if the same pattern holds for women, because through the interviews I have conducted the consensus has been that women tend to be perfectionistic, moving slower but more surely than their male counterparts. Is it possible that the more careful nature of women may cause them to fail less? We shall see what the data reveals, but the Startup Genome Team reminds me that while women may be more likely to avoid premature scaling, they may fall prey to "dysfunctional scaling", a problem that occurs when entrepreneurs fail to step on the gas pedal once the product has been validated. Following are some of the strands of DNA I have identified through the 130 interviews I have conducted over the last year.
Many people have said to me that no problem exists and that women can be as easily funded as men if they have a great idea, team, plan and advisors. However the percentages of women in technology, female entrepreneurs and female venture capitalists are extremely low compared to men.
Does Bias Keep Women Disadvantaged for Investment?
A great many small businesses are run by women, about 50% in the US. So why are there less technology startups led by women? It could be that women have to make adjustments to adapt to the greater demands of the lifestyle of a high growth technology entrepreneur. Women have been proven to be good credit risks and are a major force now in in the upper management in the Fortune 500, so perhaps tech entrepreneurship is just one more area where women will soon prove their equal competency to men. There could be a new focus on the strengths of women in business to counteract old erroneous images in the culture and to encourage more women to become high growth technology entrepreneurs. In the startup world there is a certain stereotype of the type of founder that investors love to fund: young, white, male and geeky. Female entrepreneurs need to challenge this stereotype by showing that they possess alternative approaches to solving problems that can make for great startups and disrupt industries in new ways.
A lot of feminine strengths may not match up to historical and portraits of successful entrepreneurs. This could mean that some women may need to learn skills and shore up certain qualities to be a good fit. Many spoke about the need for great female entrepreneurial role models and mentoring of women both by men and women, which includes peer mentoring as well. Women entrepreneurs may also need to learn about the venture and angel industry and to identify the best investors to whom they should pitch their startup. There are now many women friendly investors, many of whom I interviewed. It is helpful for women entrepreneurs to grow their networks and to get to know investors before stepping up to the plate to raise investment capital. This can help a female entrepreneur’s general confidence and help her identify the best avenues for her to target. Here are some interesting stats on women who raise venture from a 2007 survey by British Researcher Library House:
- women ask for exactly what they need in capital and end up with half what they require from investors
- men tend to ask for twice as much venture in hopes of getting half from investors
- female CEOs delivered higher revenues using less capital than those by men
- the average venture backed company run by a woman has annual revenues 12% higher than those by men using on average one third less capital
Female Venture Capitalists
Consumer internet already has a number of successful women and this may be an area that women feel comfortable leveraging their strengths to create successful startups. If women can learn to better leverage their strengths: networking, forming fabulous teams and advisory boards, and managing their businesses with resourcefulness and creativity, they could become very proficient at playing the startup game.
Everyone spoke about the need for extreme confidence and passion in entrepreneurs when building their businesses and raising capital. Women often attribute their success to others or circumstances outside of their control and may not focus enough on building their sense of self-efficacy. Our training and culture encourage us to put others first, as the principal care takers in the community. It is helpful to stay objective by focusing on your traction and market to show investors that your startup can succeed. Having the necessary requirements to inspire confidence in investors and knowing the data well can be a big confidence boost. A healthy ego makes for a balanced person and a great business. Overconfidence and brashness may be confused with authentic confidence but many investors suggested that brashness can be a turn off and doesn’t necessarily inspire confidence! Women are often great consensus takers but ultimately a good CEO will be able to make her own decisions after listening to her advisors.
Many people that I interviewed suggested that women can be more risk averse than men. Risk always implies the possibility of failure. Women may take risk more seriously because failure often feels like a life and death matter to them. If women are not exposed or interested in sports when they are young, they need to find other ways to support them in being willing to accomodate risk and failure and at times to even enjoy the thrill. Women need to be encouraged to find their competitive expression without damaging their ability to be receptive to others.
Don’t be Afraid to Ask for Money
5 responses
It is true the tool is designed primarily for software startups and has much less applicability outside of that scope. We are focusing on software startups first since they have the fastest lifecycle, are very cheap to start and have the most data available, but we expect to expand in the future. In the mean time we'll look into adjusting the messaging.
If you have any feedback on questions in the tool we could make more clear shoot me an email at max@startupcompass.co.
-Max
I connect with the article on many levels. I lived in the Middle East for almost 6 years and many people always ask me what it was like to be a woman in business there and I respond by saying "it's difficult being a woman in a man's world anywhere. We're different."
As a newbie tech woman founder of www.brandsforthepeople.com I'm certainly up for the challenge!
Thank you again,
Andrea
- women ask for exactly what they need in capital and end up with half what they require from investors
- men tend to ask for twice as much venture in hopes of getting half from investors
- female CEOs delivered higher revenues using less capital than those by men
- the average venture backed company run by a woman has annual revenues 12% higher than those by men using on average one third less capital"
This resonates with me. It also dovetails recent research on gender differences in the work place around initial salary negotiation: when factors like age and experience are excluded, the gender difference is more than accounted for simply by the fact that most women accept an initial offer without counteroffer. (Not necessarily by employers being consciously sexist/genderist.) According to some research, men are at least four times more likely on average to attempt to negotiate a starting salary wage increase.
Reasons given are that women often don't realize (or don't bluster assessments of) their fair market worth, don't argue with the market in part because they are happy to be offered a job; they also self-assess at even a third less than men at same experience level, they also report figuring they'll prove themselves through their work and get raises later. The catch is that men also figure they'll get raises. And both do, but initial salary negotiation sets the stage for compensation trajectory; because of this alone, men of same aptitude and experience earn far more than women over the course of their career. Women who consistently negotiate could easily earn $1M or more than their counterparts over the course of their career.
Boldness has real value under the right circumstances, but the human world seems too often - at least initially - to reward alpha social signalling over earnestness, honesty, practicality or even true competence. (Though, of course, one's definition of reward also depends in part on one's definition of value.) There's a deeply fundamental difference between straw-man arrogance and healthy, earned confidence, and men and women on both sides of the negotiating table would be better off doing the honest work to figure out the difference when choosing how to present themselves to whom, and when considering those they choose to work, trade, dream, build, trust, love, grow and live with.
Desiree
We are hardware developers growing through Joint Venture, licensing and collaborative product development. While the "Startup Compass" tool could *just* squeak out one metric that made sense, in a limited manner - referring to us as Integrators - it hardly characterizes our business as a whole, just one facet of it. By the metrics of this tool, neither Hewlett and Packard nor Jobs and Woz would have come out looking like a business with a future at the advanced prototype, deal-making stage. ;) And the grammatical hiccups didn't help. Some questions were oddly worded and - even with a flyout menu to explain the question - remained a bit vague. One was left guessing as to their meaning due to missing words.
Perhaps your team could show the world just how humble and "learning organization" you are by more correctly identifying this tool as one demonstrably valuable for certain kinds of business (the ones with which you have experience), and not others (the ones with which you have no experience). That doesn't make it any less useful a tool. Just a more honest one.
So good luck. I'd suggest a slight re-boot in the "what we call ourselves and how much of the world we feel expert enough to comment on" category. "A" for effort, though.