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10/26/11 | Uncategorized

Women-Led Startups Have Fewer Failures: But What Does This Actually Mean?

By Alicia Liu (Co-Founder, Benbria) An Inc. article was posted a few weeks ago provocatively titled “The Case Against the All-Male Start-up”, and the same story appeared in Business Insider under “TRUTH: Women-Led Startups Have Fewer Failures”. The article cites a recent study conducted by Illuminate Ventures (registration required to download), which itself references and summarizes a wide body of other research. Notably, that women-led tech companies are less capital intensive, and have fewer failures. After these articles were posted, there was an outpouring of tweets and shares that were along the lines of “Women rule!”. Although not explicitly stated, there was an undertone that this study is proof that women are good (or even better) at running tech companies. But if you read the study, it actually attributes this success to gender diversity. Ostensibly, the more women the better. However, no one (that I’ve seen so far) has attributed this success to the women themselves. Not women in general, but these particular women, who had to overcome stereotypes and differential treatment, in order to lead their companies to success. According to the Kauffman Foundation, female entrepreneurs only receive 4% to 9% of available venture capital, while the number of women-led businesses was 28% (2002). We can safely assume that the successes referred to in the study (successful IPO or M&A exit of $50M+) by and large had to raise VC money. So these women, on top of an already grueling process of pitching and due diligence, had to overcome additional obstacles, including investor bias. So wouldn’t it make sense that this additional selection, though unfair, means that only the very best women are able to get funding and grow their businesses to successful exits? Viewed like this, the study results are not surprising. I can draw a parallel to women in male-dominated fields of study, e.g. computer science and engineering. In my own experience and in research, female students have higher grade averages as a group compared to male students. I don’t think in this case anyone would argue women are better at being computer scientists or engineers, or that this is somehow due to gender diversity. I think it’s just the small percentage of women that stick it out have to be smarter and more resilient, otherwise they would be filtered out by the additional obstacles. To me, the additional selection imposed on women through overt and subtle stereotypes, biases, and differential treatment contributes to fewer women in male-dominated fields, like running a tech start up, but it also results in higher quality. This is analogous to survival of the fittest. I started writing this post when the article first came out, but I hesitated these past weeks, because I expect my view to be unpopular. This view runs counter to the rah-rah enthusiasm for the articles that are making a blanket statement of women == good for tech startups. Nonetheless, I think the “survival of the fittest” explanation is a more logical one than women are better at making tech start ups succeed, and more of contributing factor than gender diversity. This post was originally posted at Alicia Liu’s blog. Editor’s note: Got a question for our guest blogger? Leave a message in the comments below. Alicia LiuAbout the guest blogger:Alicia Liu is Co-Founder of Benbria, an enterprise software start up that was ranked the 11th fastest growing emerging company in Canada by PROFIT magazine, where she led product management and marketing. Alicia is a front-end web and iOS developer. Alicia blogs about startups, web dev, travel, and eating. She holds a BAsc in Computer Engineering from the University of Waterloo. Follow her on Twitter at @aliciatweet.

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