Investing in women-owned businesses in America has become an increasingly attractive option for investors in recent years. With the rapid growth of women entrepreneurs and women-led startups, there is great potential in this sector. Studies have shown that women-owned firms generate higher revenue and create more jobs on average compared to all businesses. However, women entrepreneurs still face challenges in accessing capital and scaling up. By investing in women business owners, investors can tap into a high-growth market while also promoting gender diversity and inclusion. This article will explore the opportunities, benefits, and strategies for investing in women entrepreneurs in America.
Rising trend of women entrepreneurs in America creates investing opportunities
Over the past two decades, the number of women-owned firms in America has increased substantially. According to American Express, the number of women-owned businesses increased by 21% between 2014 to 2019, while all businesses grew only 9%. Revenue growth for women-owned firms was also higher at 21% compared to 15% for all businesses. The growth has been particularly strong in sectors like healthcare, professional services, and transportation. These promising growth trends present significant opportunities for investors looking to deploy capital in early-stage women-led companies.
Women owned businesses deliver strong returns for investors
Research has shown that startups founded by women tend to deliver higher returns compared to ventures founded by men. A study by First Round Capital of its investments over a decade found that female-founded companies outperformed male-founded ones by 63%. According to Kauffman Fellows research, women-led tech companies generate more revenue per invested capital compared to tech firms led by men. The revenue multiple for women-led firms was 0.72x compared to 0.66x for male-led firms. The outperformance holds true even when controlling for company age and sector. By investing in women business owners, investors can capitalize on the growth potential.
Investing in women entrepreneurs promotes diversity and financial inclusion
Despite their growth and potential, women entrepreneurs continue to face barriers in securing funding and scaling up their ventures. According to PitchBook data, women-founded startups received only 2.3% of total VC investments in 2020. Providing capital to women business owners not only presents an investment opportunity but also promotes diversity and inclusion. More funding for women entrepreneurs can narrow the gender investment gap and create a more equitable playing field. Investors can use their capital to propel innovations by women and shape a fairer society.
Strategies for investing in women-led firms
For investors looking to deploy capital in women-owned firms, here are some strategies to consider:
– Seek out VC funds with a specific women entrepreneur focus like HearstLab, Raise Global Ventures, and SoGal Ventures.
– Connect with networks and communities supporting women founders like Digital Undivided and Ellevest.
– Look for startups with at least one female founder, diversify across sectors.
– Provide follow-on funding and support beyond early seed rounds where the gender funding gap is widest.
– Offer mentorship and connections to women entrepreneurs in addition to capital.
– Advocate for greater transparency from funds regarding diversity data of their investments.
In summary, investing in women-led businesses provides strong investment returns while also promoting gender diversity and inclusion. With the rapid increase of women entrepreneurs in America, this sector offers attractive opportunities. By implementing thoughtful sourcing strategies and providing capital and support, investors can reap financial rewards and catalyze innovation by a broader range of entrepreneurs.