Investing in Women-Led Startups
A Smart Strategy for High Returns and Economic Growth
In recent years, the investment world has started to recognize the untapped potential of women-led startups. These ventures are not just about bridging the gender gap; they represent a golden opportunity for individual investors to diversify their portfolios and achieve higher returns. This blog post delves into why investing in women-led startups is a sound financial strategy, drawing insights from The XX Edge and the experiences at Alumni Ventures’ Women’s Fund.
About the Authors
Ruth Shaber, MD
Ruth is the co-author of The XX Edge, a book that highlights the overlooked investment strategy of including women as financial decision-makers, showing significant social, economic, and environmental benefits. With 35 years of experience, Ruth is a dedicated healthcare leader, investor, philanthropist, and author focused on promoting health and opportunity for women and girls.
Laura Bordewieck Rippy
Managing Partner, Women's FundLaura brings operational perspective as a CEO, Chairman, and executive in technology startups, in addition to investing experience. As Managing Partner at Ripplecreek Partners’ technology practice and General Partner at FA Technology Ventures, she worked many tech sectors across many economic cycles. She also served as CEO at Handango, creating the first marketplace of mobile apps. At Microsoft, she co-founded two businesses as an intra-preneur in an elite swat team spun out of Bill Gates’s office. Laura holds an MBA from Harvard Business School and AB in Government from Dartmouth.
The XX Edge: A New Paradigm in Gender-Focused Investing
In The XX Edge, Patience Marime-Ball and I, Ruth Shaber, propose a transformative approach to investing where women play central roles in financial decision-making. This paradigm shift is not only about promoting gender equality but also about leveraging the unique strengths that women bring to the table. The evidence in The XX Edge is compelling:
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Gender-inclusive teams are 21% more likely to see outperformance in profitability than their peers.
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Companies with female CFOs witness a 6% increase in profits and an 8% stock performance bump compared to those led by male predecessors.
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Startups with female founders performed 63% better over a ten-year period than those with all-male teams.
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Women-run hedge funds outperformed the average of larger hedge funds by 6% over a six-and-a-half-year period.
These statistics highlight a simple yet often overlooked investment strategy: including women as financial decision-makers within organizations can lead to higher returns and greater economic growth. This is the essence of The XX Edge.
Why Invest in Women-Led Startups?
Diversification and Higher Returns
Investing in women-led startups is not just about paving the way for visionary female entrepreneurs; it’s also a smart financial move. Diversifying your investment portfolio with these ventures can lead to higher returns, as evidenced by the data from The XX Edge. Women bring unique perspectives and skills, which can result in innovative solutions and successful businesses.
Economic Growth
When women succeed, everyone benefits. Women-led startups contribute significantly to economic growth by creating jobs, fostering innovation, and driving profitability. By investing in these ventures, individual investors can play a crucial role in supporting economic development and closing the gender gap in the business world.
Proximity to Problems leads to Innovation
If you consider the most pressing world challenges such as healthcare, education, care economy or violence prevention, you’ll find that women tend to be closer to the problems that need to be solved. Whether as consumers or part of the workforce, women are often the most impacted by these systemic problems and therefore are more likely to produce the innovative solutions that investors are looking for.
Social Impact
Beyond financial gains, investing in women-led startups has a profound social impact. It promotes gender equality, empowers women, and creates a more inclusive and diverse business ecosystem. This, in turn, can lead to more equitable opportunities for future generations.
The Time to Invest is Now
Despite the clear benefits, women-only-founded companies received just 2% of the total capital invested in VC-backed startups in the U.S. last year. This disparity underscores the need for more targeted investment strategies. As we navigate a period of recalibrated valuations, now is a great time to invest in women-led startups. These ventures are poised for growth, and supporting them can lead to substantial financial and social returns.
Alumni Ventures’ Women’s Fund: The Intersection of Female Investors, Female CEOs, and Female VCs
At Alumni Ventures, we have embraced this new paradigm with our Women’s Fund, which I, Laura Rippy, have the privilege of managing. Our fund is designed to be an open door for investors who want to support female founders and benefit from their innovative ventures. We focus on seed and Series A rounds, acting as co-investors alongside institutions. Since our inception, Alumni Ventures’ affiliated funds have raised over $1.3 billion from 10,000 investors; and has built a robust portfolio of more than 350 female-led companies.
One of the differentiating aspects of our fund is its inclusivity. To invest, you don’t need to be a venture capitalist or a startup founder. Our minimum capital commitment is $25,000, and contributions can come from various sources, including retirement accounts. This approach allows a diverse group of individuals to support women entrepreneurs, many of whom have historically faced significant barriers in securing funding.
The Alumni Ventures Women’s Fund is a trifecta:
- Female VCs crafting the portfolio. Our team of myself, two investing Partners, (Sophia Zhao and Meera Oak) and a Senior Associate (Brittney Wade) compose the diversified portfolio of 20 venture-backed startups. As Ruth writes, there is some evidence to suggest that female investors tend to make better decisions.
- Female Founders, CEOs, or Co-Founders lead the portfolio companies. As Ruth writes, and Julia Boorstin (see blog here ), some data indicates female startup leaders tend to be more capital efficient and show promise to outperform their male peers.
- Open invitation. The mission of Alumni Ventures is to democratize access to venture capital investments. Those who join the Alumni Ventures Women’s Fund can put their personal capital to work, backing female-led startup companies, enabling them with more capital to make their ventures successful.
Conclusion
Investing in women-led startups is a powerful strategy for diversifying your portfolio and achieving higher returns. By embracing the principles outlined in The XX Edge and supporting initiatives like the Alumni Ventures Women’s Fund, individual investors can contribute to a more equitable and prosperous future. Let’s seize this opportunity to foster innovation, drive economic growth, and empower the next generation of female entrepreneurs.
This communication is from Alumni Ventures, a for-profit venture capital company that is not affiliated with or endorsed by any school. It is not personalized advice, and AV only provides advice to its client funds. This communication is neither an offer to sell, nor a solicitation of an offer to purchase, any security. Such offers are made only pursuant to the formal offering documents for the fund(s) concerned, and describe significant risks and other material information that should be carefully considered before investing. For additional information, please see here. Venture capital investing involves substantial risk, including risk of loss of all capital invested. This communication includes forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward-looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements, whether due to subsequent events, new information, or otherwise.