Research Spotlight: Why the World Needs More Female Entrepreneurs

(Written by Isabel Hirama) 

At GirlsUp, we believe that when the power of female entrepreneurship is fully unleashed, the world won’t know what hit it. In this series of Research Spotlights we’ll be unpacking studies that back up this belief with empirical evidence. In each post, we’ll lay out one study’s core details and results. Then we’ll discuss how this can help you on your quest towards entrepreneurial success.

Our first study, conducted in 2012 by Dow Jones, asked a simple question: “Do female executives drive startup success?” You won’t be surprised by the answer, but you may be taken aback by the stats that go along with it. Let’s take a look at the study.

What they did:
The Dow Jones VentureSource research team examined data gleaned from 15 years of tracking over 20,000 VC-backed companies in the US. They split up the startups into three groups:

Successful companies had either become consistently profitable, gone public with an IPO, or were sold for more than their initial VC investment.

Unsuccessful companies were those that did not meet any of the above criteria. That is, they had not become profitable, even if they were still running.

Failed companies made up a subset of the “unsuccessful” group. They were companies who not turned a profit and had gone out of business.

The researchers then looked at the companies’ high-level executives (over 150,000 of them) to compare the three groups’ amount of women leaders, with striking results.

What they found:
The study’s results fill over thirty pages with graphs and data, but even just a few important results paint a vivid picture. For example, among the study’s 20,194 businesses, the researchers found that: 

• 45% did not have a single female executive (leader with high-level decision-making power). 
• Just 9% had four or more female executives, while 81% had four or more male executives.  

This alone would convince most people that we need more female entrepreneurs. But there’s more. Results also showed that:

• At unsuccessful companies, a median of 3.1% of executives were female, while at successful companies the number was over twice that, at 7.1%. 

Although the proportions in both groups were disappointingly low, it’s clear who was on the right track. Reaching success as an entrepreneur is no easy feat, and any advantage is a good one. In their next comparison, between the “successful” and “failed” groups, the researchers found that: 

• 49.7% of these companies had succeeded and 50.3% had failed. 

Very few factors seemed to change this almost fifty-fifty chance, except for one: 

• Among companies with five or more female executives, 61% were successful and only 39% failed. 

Too bad, as we saw earlier, that so few of the companies had even four women leaders. 

What this means: 

These results strongly suggest that yes, women do drive startup success. Clearly the 45% of companies with no female leaders are missing out. It’s important to note that the correlation between female execs and success does not guarantee that women caused each and every success. Still, alternate explanations are equally encouraging. Perhaps successful founders wisely made sure their teams included women, or women were better at predicting which startups would succeed, and joined accordingly. The truth is likely is a mix of all these explanations, and more. 

In any case, this research is significant to anyone embarking on the unpredictable adventure that is entrepreneurship. Men, keep this in mind when choosing your co-founders. Women, know how vital you are as trail-blazers and team-mates. The startup world needs more smart, savvy women leaders, and if you’re part of the GirlsUp community, you are well on your way to becoming one of them. 

You can read the full text of the Dow Jones VentureSource study, “Women at the Wheel. Do Female Executives Drive Start-up Success?” here.