Does Gender Diversity Matter?
Are You Fundable #1
In case you weren’t aware of this, investors such as venture capitalists and angel investors say they invest in the team first and the product second. They’re lying.
The fact is, unless you already have a track record of winning for investors, most investors look at your business first. They look at the market size and growth, the value proposition, the business model, your unfair advantage, financial projections, and so on. If they like it all, your management team will then make or break the deal. But they look at the business first.
Yet my new book Born to Star makes a compelling case for having the right people on the bus, the right members of your team. In fact, it tells you specifically the right choice for second-in- command. Does this really matter when seeking funding?
The answer is found in the writings of another Pulse blogger and LinkedIn Influencer, Sallie Krawcheck, CEO and founder of Ellevest and previously CEO of Merrill Lynch Wealth Management and US Trust:
This article is loaded with resources for female founders and entrepreneurs and I highly recommend it. And it makes a prediction of relevance to this article:
Sallie predicts a rapid growth in the number of female founders and entrepreneurs. She’s on the money as stats are showing. For example, Y Combinator (a leading startup incubator) has been hosting the Female Founders Conference and now finds at least 20% of their applicants AND winners have female founders (at least one of the two co-founders is female). I’m willing to bet this will grow quickly. I’m hoping ultimately to see 100% – that is, 100% of startups include at least one woman as a co-founder.
What about funding? Remember that Y Combinator winners have all received their first round of funding, from Y Combinator itself. If Y Combinator sees them as worthy of funding, so will many other investors. But what does this have to do with female founders?
Here’s where it gets interesting. If you look at many of these companies and their teams in detail (see Female Founders Stories) you’ll find that 1) all of them have co-founders, and 2) many (though not all) of the teams are mixed gender (one man, one woman). They don’t do this for political reasons. So why do they frequently select mix-gender founding teams? I believe it’s because of the differences in thinking and leadership styles between the two co-founders of a team, whether both women or mixed gender. When there are two women, for example, is one, for example, more the vision-master and one more the execution master? I think that’s what you’ll find, and I think it’s what Y Combinator found, whether conscious or unconscious.
Sallie doesn’t answer this question directly. However, she does reference a crucial data point that you should highlight when you speak with investors: With ten years of investing experience across 300 companies and 600 co-founders, venture firm First Round Capital did the research, asking how did companies perform with a female founder? The answer? Companies with at least one female founder performed 63% better than companies with all-male teams. Here is the article and study in Forbes magazine.
What they mean is companies with at least one female founder outperform all men teams.
Sallie Krawcheck’s second article seems to confirm my observation that it’s not gender diversity (on an executive team) itself that makes the difference in business success. What makes the difference is what exactly gender diversity brings to the team. In her article, Why Are We Still Telling Women to Act Like Men at Work Sallie looks at the myth of women succeeding by acting like men rather than bringing to the workplace authentically female abilities and leadership.
Since Sallie is here not talking about entrepreneurs, we have to extrapolate. Her message is that women bring more to any business when they bring their authentic natures rather than trying to act like men. Extrapolating to the issues faced by entrepreneurs seeking funding and growth, diversity of thinking and leadership style bring many of the attributes that investors seek in a winning team. So, for entrepreneurs here’s the key takeaway:
Key takeaway: Founding teams with gender diversity, particularly if there is also thinking diversity and leadership-style diversity, will increasingly pass investor muster. Make a point of this in your interviews and presentations AND cite the evidence. This will impress many investors. Make sure they notice. This is one way to make sure you’re fundable.
Now go and download Born to Star – Secrets for Business Funding Success. It will make sense now.