Women in startups: the new disruptors

Jessica Livingston of Y Combinator

With a proven track record of success, female entrepreneurs are gaining the confidence and success to take the next big step.

When Inc. magazine recently suggested the next Steve Jobs will be a woman, it was far from fanciful thinking. A rising tide of successful female entrepreneurs is set to reshape “most admired” business lists.

At the same time, a growing number of women-led start-ups is emerging, in no small part due to a growing proliferation of female-focused incubators, accelerators and venture capital firms.

“We’re on the cusp of a shift,” says Whitney Johnson, a former Wall Street banker who’s rated by the Thinkers50 as one of the world’s most influential management thinkers.

Johnson’s optimism is well-founded: a number of studies show women-owned and led businesses perform better. Seed investment firm First Round Capital researched 600 companies and found that those with at least one female founder outstripped those with male-only founding teams by 63 per cent (based on increases in valuation).

Another study by the Ewing Marion Kauffman Foundation revealed that women-led tech companies have a 35 per cent higher return on investment and, when backed by venture firms, generate revenues 12 per cent higher than comparable male-run tech companies.

"It’s easy for women who are not the face of a company to not exist." Jessica Livingston, Y Combinator 

Johnson herself backs her statement with statistics and insights on the momentum of disruptive innovation.

“In 2000, only 1.7 per cent of all venture funding was allocated to women-led businesses,” she says.

“Today, we are in the range of 10 per cent, depending on your source. While the number is still painfully low, we are at a tipping point, ready to move into hyper-growth along the S-curve of disruption.” 

Quiet achiever

One woman who has already moved along that curve is Jessica Livingston, one of the world’s most successful entrepreneurs.

Livingston and her husband and business partner, Paul Graham, have spent 11 years hatching and investing in more than 1000 start-ups. As co-founders of incubator Y Combinator (YC), they’ve helped bring to life huge business success stories, such as home rental company Airbnb and file-sharing service Dropbox.

Yet through this time, Livingston has been almost invisible to the outside world.

Related: 5 innovative start-ups founded by women

While the couple conceived the idea for YC together, it was Graham who became the trailblazing legend.

“I was never referenced as a co-founder,” Livingston told Fortune magazine. “I didn’t care, because I was focused on helping our companies grow and running YC. It’s easy for women who are not the face of a company to not exist.”

On his personal blog, Graham notes the irony that Livingston didn’t get any of the credit for YC because she was taking care of business, dedicated to creating the right culture – they call her the “social radar” – and picking the right start-ups.

Boosting female founders

Livingston’s experience is not unusual. Three years ago, she stepped out of the shadows to redress the balance for other women when she hosted YC’s first Female Founders Conference in San Francisco.

“Since I am in the business of funding first-time founders, I need to encourage more women to actually start companies and help them make the jump,” she said before this year’s conference.

“We need more women-led unicorns [start-ups valued at US$1 billion or more], and I can help with finding those companies.”

YC didn’t fund many women in the early years. In 2011, 4 per cent of graduating companies had at least one female founder.

“Now, 25 per cent of the last class had at least one woman on the founding team,” says Livingston. “I want that to be 50 per cent.”

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On the cusp

Kay KoplovitzLike Livingston, Johnson believes a critical mass of female entrepreneurs is needed for exponential growth, eliminating long-lamented obstacles such as lack of role models, a shortage of mentors and missing track records, which have kept women out of the entrepreneurial action.

While funding, or lack of it, typically is blamed for impeding women’s start-ups, Johnson believes that’s putting the cart before the horse.

"Women understand where the friction is in the marketplace, so they know what needs to be done to fix it." Kay Koplovitz, Springboard Enterprises 

“Confidence is the biggest issue for entrepreneurial women – you need to keep it compelling; people have to buy it. After that comes funding,” she says.

High-profile US businesswoman and investor Kay Koplovitz has been redefining the course of female entrepreneurs for decades. Gender issues gained prominence for the cable network pioneer when US president Clinton asked her to run the bipartisan Women’s Business Council in 1998.

In 2000, she launched Springboard Enterprises, an accelerator that selects women with scalable companies in life sciences, digital media and technology and puts them through boot camps, with follow-up coaching to prime them for funding pitches. 

Koplovitz remembers the shock for investors when the first round of 26 women who’d “showed up for showtime” pitched.

“Twenty two were funded, two merged their businesses, one sold her business, one wasn’t funded. That’s my track record,” she says.

Building a community

Springboard Enterprises has been instrumental in developing the ecosystem of female entrepreneurs who have built big global companies, and the investors and advisers supporting their growth. The US organisation now boasts 627 women-led companies with businesses spread across six continents that have raised a total of US$7.4 billion; this includes 12 IPOs.

While seed and angel investment is more accessible, the newly formed Springboard Fund is for later-stage investments of more than US$20 million.

Beyond their emerging entrepreneurial prowess, there’s another factor driving investors to women’s start-ups, says Koplovitz: awareness of women as decision-makers in 80 per cent of consumer product purchases. The nature of products and services is changing as a result.

“In 2000, investors weren’t interested in treatments for ovarian cancer or breast pumps for working mothers,” says Koplovitz. 

Healthcare IT is the stand-out field, she says. “Women control healthcare for their families. They understand where the friction is in the marketplace, so they know what needs to be done to fix it.”

Springboard Australia was set up four years ago and 75 per cent of its 36 women-led companies have fast-tracked their way to capital, raising A$75 million so far. One-third now have operations in the US. 

The “community of support” – cohorts of women and alumni sharing gritty realities and collaborating – is building confidence and the crucial critical mass in tandem, notes Topaz Conway, CEO of Springboard Australia. And the wider ecosystem is growing. Conway has counted some 70-plus incubators and accelerators now running nationally.

“People invest in people, not products,” she says. 

Increasingly, it seems, those people are going to be women.


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