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04/24/2013

Women-led startups outperform rivals: study

Here’s some advice for venture capital funds looking to turn a profit on upstart businesses: bet on women.

According to a new study released by the U.S. Small Business Administration’s Office of Advocacy that analyzed 90,000 deals in the U.S. from 2000 to 2010, venture capital funds that invest in women-led companies had better results than those that didn’t.Women-owned businesses account for 28.7 per cent of U.S. companies and are a fast growing entrepreneurial sector.

Georgia topped U.S. states in the growth of female-owned businesses, reports the Atlanta Business Chronicle, which first reported on the study. Those firms performed well even though they received less private equity funding than their rivals, the study said.

The U.S. study’s results are hardly isolated.

In India, a recent study of nine Indian companies run by the female women managers outperformed the 30 leading listed firms on the Bombay Stock Exchange.

Over five years through 2008, the nine companies had a compounded annual growth rate of around 35 per cent in pretax income, compared to 21 per cent for the BSE-30 firms.

In fact, many non-profit charities have made it a priority to focus on helping to finance female entrepreneurs. For good reason. The International Monetary Fund forecasted last year that Africa would have the fastest-growing economy of any continent over the next five years, and many new entrepreneurs in Africa are women.

The rate of female entrepreneurship is higher in Africa than in any other region of the world, The New York Times reported last year, citing World Bank statistics.

Rick Westhead is a foreign affairs writer at the Star. He was based in India as the Star’s South Asia bureau chief from 2008 until 2011 and reports on international aid and development. Follow him on Twitter @rwesthead

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