Our newsletter, to be delivered twice monthly, will explore pertinent issues related to smart technology, clean energy and sustainable agriculture. Our goal is to keep a finger on the pulse of industry trends and how they relate to Novus’s goals and success
Why investments by women — and investing in women — matters
After years of gains, women-led startups saw a significant drop in funding in 2020. The total market share of VC funding for women-owned businesses fell from 2.8% in 2019 to 2.3% — an 18% decrease.
Companies led by women of color are especially underrepresented in investor fundraising. Although the number of startups founded by Black women to achieve $1 billion unicorn status has almost tripled since 2018, Black and Latinx women still receive only a combined 0.64% of the market share.
But research suggests that investors who overlook women-led startups are missing out.
According to an analysis by Boston Consulting Group, women-led startups deliver twice as much per dollar invested. This could be because stronger scrutiny from investors means female founders must present stronger business plans and more measured approaches to scaling than their male counterparts do.
While they might not garner the same media splash as high-growth, venture-backed companies, women-led businesses are able to sidestep some of the challenges those companies face. The two-year fail rate for startups run by Black women — which are more likely to be self-funded or run on revenue — is only 27%. The fail rate for all companies is 40%.
Research published in the Journal of Entrepreneurship & Organization Management found that women-led businesses are more likely to focus on their social contributions and employee empowerment initiatives like psychological safety and career mobility. This means they are in a position to attract and retain top talent.
And as an analysis by Kauffman Fellows shows, startups with female founders are staffed by 2.5 times more women than companies with male founders. Companies with both a female founder and a female executive hire 6 times more women than companies helmed by men. That matters more than ever since the pandemic forced women to drop out of the workforce in unprecedented numbers. Job creation for this demographic will be especially important to the nation’s economic recovery.
As the Harvard Business Review points out, investors shouldn’t necessarily shift to funding women-funded startups solely because they’re led by women. However, it could behoove many to examine and adjust the institutional patterns blinding them to the potential these companies present.
It could help to see more women in decision-making roles. Currently, only 12% of these positions at VC firms are held by women. However, women are set to come into $30 trillion in wealth in the next three to five years. It stands to reason, then, that more women will be in a position to become investors. This, in turn, puts them in a greater position to ask the companies they invest in for a spot on the board, yielding even greater decision-making power and opportunities for impact.
In Other News
Mellody Hobson was just named co-CEO of Starbucks, making her the only Black chairwoman of an S&P 500. Ariel Investments, an asset management firm where Hobson is co-CEO and president, recently announced Project Black, which will invest in minority-owned businesses to help them scale.
Ocean Conservation Yields Economic Gains
Research published in the scientific journal Nature suggests concerted global efforts at ocean conservation would improve marine biodiversity — and thus the number of harvestable fish — while also upping the amount of carbon absorbed by those waters.
Reporting on pollution
A Different Take on the Tropical Island
Among the winners of the Helsinki Energy Challenge, which offered a 1 million euro reward for anyone who could come up with a viable alternative heating technology, is an assemblage of floating reservoirs designed to store heat in seawater while also serving as a climatron and heated swimming pool.
Carbon Sequestration Could be a Clothes Call
Fast fashion has been a major environmental concern. But at Paris Fashion Week, a collaboration between the clothing label EgonLab, the design studio Post Carbon Lab and French auto maker DS automobiles showed a micro-collection of garments covered in live algae, which absorbs carbon dioxide and changes it into oxygen.