Here's an experiment: Name five iconic entrepreneurs. Actually, don't bother, because we can pretty much predict your answer. Every year, we ask the Inc. 500 honorees to name the entrepreneurs they most admire. The answers: Steve Jobs, Elon Musk, Richard Branson, Mark Cuban, and Bill Gates. We've also seen Mark Zuckerberg and Tony Hsieh. The list varies a bit each year, but one constant remains: They're all men.
That may not seem like much of a problem. After all, the entire country, and in many cases much of the world, has benefited from the contributions of these men: the jobs they've created, the technologies they've built, the instant access to European footwear. So what does it matter if they're all sporting a Y chromosome?
It matters a lot. It matters in the most basic sense that entrepreneurship is so often touted as the great unlocking of human capital, which is exactly what it should be. But when it comes to fast-growth entrepreneurship of the exalted and peculiar variety that produces breakthrough entrepreneurs, the U.S. has done a great job of unlocking only about half of our human capital. Women own about 36 percent of U.S. businesses; just 10 percent of Inc. 500 companies are led by women.
That's the past. Wave goodbye, and blow it a kiss. Don't linger too long, though, because the future looks radically different, and radically better. We're going to see a rising tide of successful female entrepreneurs, and we're going to see them on that most-admired list, thanks to their leadership ability, wide-ranging experience, education, raw talent, and tendency to deliver better returns. Men are changing too, seeing opportunity where it's previously been overlooked, and investing in and supporting female entrepreneurs who weren't considered backable before. That means more job creation, more innovation, and more inspiration for the next generation of entrepreneurs.
Extraordinary human capital, after all, doesn't just sit around waiting to be noticed. Entrepreneurs are by their nature disrupters, whether they embrace the label or not. For female entrepreneurs right now, that means not just disrupting their chosen fields but also disrupting the old boys' club, with its myopia and patriarchal outlook.
No problem. They're already on it.
Perhaps the most direct evidence that female fast-growth entrepreneurs have been consistently underrated, and won't be much longer, comes from the experience of current company builders. A growing body of research indicates that women, when given a fair shot, are better at high-growth entrepreneurship than men. Not just as good as the men. Better.
In July, First Round Capital released some startling numbers. The seed-stage firm examined 300 of its investments across almost 600 companies, revealing that those that included at least one woman founder performed 63 percent better, as measured by increases in valuation, than those founded by all-male teams. In a similar vein, the Ewing Marion Kauffman Foundation showed that women-led private technology companies have a 35 percent higher return on investment than male-led ones. When they get venture money, these women-led companies generate revenues that are 12 percent higher than those of comparable male-run tech companies. And a study by Illuminate Ventures demonstrated that women use capital more efficiently than men.
None of this happens without leadership--another area in which women, often thought to be not determined enough, not inspiring enough, not insert-adjective-here enough, actually excel. In 2011, Zenger Folkman, a consulting firm specializing in leadership development, asked direct reports, bosses, and peers to rate 7,280 leaders on 16 traits thought to be the ingredients of outstanding leadership--from taking initiative to displaying high integrity and honesty. Women outscored men on 12 of the 16, and did best on two measures stereotypically thought of as male strengths: driving results and taking initiative. Women consistently rated better than men in overall leadership ability; the higher up in the organization the leaders were, the bigger the discrepancy between men and women, and the more the women shone.
With leadership, though, one often also needs experience. For all we hear about 20-year-olds dropping out of Stanford to raise trunk loads of venture money, most entrepreneurs need industry knowledge and connections to start a company. Women are gaining both, starting in school and continuing throughout their careers. Women now earn 36.5 percent of all business school degrees. They also earn about half of all MDs. No surprise, then, that health care is a particular bright spot for female entrepreneurs, with Elizabeth Holmes's lab testing company, Theranos, valued at $10 billion. Sheila Lirio Marcelo took Care.com public in 2014; Rachel King did the same with GlycoMimetics; and more recently Anne Wojcicki's 23andMe has joined the unicorn ranks.
The weakness, by the same token, is in computer science, where women earn only 18 percent of undergraduate degrees. But maybe when it comes to entrepreneurship, this isn't the deal killer it's been assumed to be. The First Round data, among other surprises, shows that having a technical co-founder served to sink the value of a consumer-focused startup by 31 percent.
Too often, the single biggest stumbling block for women entrepreneurs has been access to capital, especially equity capital. That's partly because 94 percent of investing partners at venture firms are male and, female entrepreneurs say, less likely to understand the potential of a business that specifically targets women as customers. Care.com connects caregivers to potential employers, and, says co-founder and CEO Marcelo, "we're having to educate the Street, which is 99 percent male, on how women look for care."
We're also finally acknowledging that unconscious bias is real, and that it affects both men and women. In a study published in 2014, researchers asked people of both sexes to watch pitch videos. Some of the videos were narrated by a man, others by a woman. Sixty-eight percent of the people who watched the videos said they'd fund the man, compared with only 32 percent who said they'd fund the woman. Those watching the videos--men and women alike--considered the pitches from the men more "persuasive," "fact-based," and "logical" than the pitches from the women. Even though, word for word, the scripts were exactly the same.
Some VCs are trying to change. In the rare instances in which venture capitalists used to invest in women, they'd promptly replace them with men, says Amy Millman, co-founder and president of Springboard Enterprises, which mentors and coaches women to raise venture funding. Now, she says, when VCs invest in women, "they brag about it." Kleiner Perkins Caufield & Byers ordered up training for the firm in overcoming unconscious bias, and is now offering it to its portfolio company CEOs.
As enlightenment ripples across the establishment, women with the relevant experience or means are realizing that if they too want to see more amazing women running amazing companies, they've got to put their money where their frustrations are. Golden Seeds, a group of mostly ex-Wall Street women, has been providing early funding to female-run companies since 2005; Cindy Padnos's Illuminate Ventures was formed in 2009. This trend seems to be reaching a tipping point. In 2010, venture capitalists Sonja Hoel Perkins and Jennifer Fonstad corralled a group of Silicon Valley's most powerful women to form Broadway Angels; so far, 48 percent of its entrepreneurs are women. Theresia Gouw, once a partner with Accel Partners, and Fonstad, formerly managing director at Draper Fisher Jurvetson, founded Aspect Ventures; Aileen Lee left Kleiner Perkins to launch seed fund Cowboy Ventures; Gilt Groupe's former CEO Susan Lyne hatched AOL's BBG (Built by Girls) Ventures; serial entrepreneur Anu Duggal launched the Female Founders Fund with the express purpose of investing in women.
These power centers are starting to have an impact, both through their investments and by convincing others that companies led by women are an undervalued asset class--one that will deliver superior returns. A Babson College study reported that in 1999, fewer than 5 percent of venture capital investments went to companies with a woman on the executive team. By 2011, that number had increased to 9 percent. Only two years later, in 2013, companies with a woman on the executive team were attracting 18 percent of venture investments. You don't have to be courting VCs to notice the change in mindset: According to Alicia Robb, a senior fellow at the Kauffman Foundation who analyzed more than 25,000 Kickstarter projects, female crowdfunders on the site are more likely to get fully funded than men. Why? Because women are using Kickstarter as a vehicle to invest in other women.
That dynamic--of women actively supporting one another's success--is something female entrepreneurs say is relatively new, and greatly welcomed. Just like men, they need a supportive network and successful role models, two things many have lacked. "Now there's Sara Blakely, there's Tory Burch," says Jane Wurwand, who recently sold her company, Dermalogica, to Unilever. "It's that 'If you see it, you can be it.'"
Jessica Herrin, the founder of retailer Stella & Dot, speculates that the first generation of successful professional women were so busy dealing with sexism that they couldn't spare the energy or political capital to support the other women in line behind them. Now, says Herrin, "every female CEO I know is hell-bent on creating more of them." Even Elizabeth Holmes, who epitomizes the lone entrepreneur as much as anyone, admits how much of a difference it makes to have other women supporting her. When she started Theranos, she says it was women more than men who doubted her. Now, she says, women are "coming out of the woodwork" to support her.
For more than two decades, Springboard's Millman has contended that we needed vast societal changes before we'd have masses of women building fast-growing companies, cracking the very top ranks of entrepreneurship. Now, finally, she says, "we're at an inflection point. It's happening."
For the most-admired list, that means one thing: Steve, meet Stephanie.