The NexGen Trend in Startups

I had the privilege of attending a conference this week in Austin that focused on women and investing. The title was as expected, Women Investing in Women, and it was put on by the FUND Conference. It was not really about investing in stocks, but it definitely tied in to our focus on emerging trends and our changing world, so I wanted to talk this week about what I learned and how it could ultimately affect our investing.

The conference focused on women putting money into privately owned companies led by other women. I was one of the few men in attendance, and I must say that I was struck by how well the women were networking and connecting with each other. I know men do the same things, but let’s be honest here, sometimes we let our egos get in the way of helping out a peer.

My biggest takeaway from the conference was that women-led companies are definitely the hot trend in startups. They are really starting to make strides, though there is still a long way to go. Data showed that only 2% of venture capital funds went to companies founded by women in the last year. The good news is that number is on the rise, and I am proud to be a part of that with one of my other companies.

Another takeaway is that women-led companies tend to do well. One study done by the biggest bank in Scandinavia looked at nearly 400 companies that have a woman as either CEO or chairman of the board. Going back to 2009, the group of women-led companies beat the overall global benchmark in all but one year. Even more impressive was the annualized return of 25%, more than double the 11% gain in the MSCI World Index.

I think there are probably many reasons why this is the case, but one is that women tend to be more conservative. Another is that they take a long-term approach to managing a business. When I speak with young entrepreneurs, I really emphasize how it must be about the long game. Being young and eager, they don’t always want to hear it, but I’ve seen it time and time again – looking for instant gratification will ruin you and your business.

The same is true for investing. Build a long-term portfolio of innovative leaders in powerful mega-trends and you will have more success than the other person who is always looking to make the quick buck. Don’t get me wrong. I’m a chart guy and wrote a book called The Swing Trader’s Bible, so you know I’m not going to ignore short-term profits. But even there, I have strict criteria to put the odds dramatically in our favor so we know we will have more and bigger winners that will far outweigh the fewer and smaller losers.

You also want to take a long-term approach when investing in stocks of early-stage companies. As you know, I love to uncover NexGen opportunities before Wall Street does. Doing so requires an amount of work and degree of patience that Wall Street often doesn’t have, but it’s where you can make huge money. We’ll talk more about this in the coming weeks.

More Women-Led Companies

For now, I’ll leave you with a final thought on public companies run by women. A study last year showed that about 5% of companies in the Russell 3000 (which consists of the largest publicly traded companies in the U.S.) were led by women. I expect that number to rise.

Here’s a look at some of the largest companies that currently have women as their CEOs:

  • International Business Machines (IBM): Ginni Rometty
  • General Motors (GM): Mary Barra
  • PepsiCo (PEP): Indra Nooyi
  • Oracle (ORCL): Safra Catz
  • Campbell Soup (CPB): Denise Morrison.

I’m always on the lookout for fresh investment opportunities, and you can bet part of my analysis includes the person running the company. That’s true more than ever after attending today’s conference.

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