Exciting headlines with stories of venture capital funds investing in startups have become a daily affair. We are in an entrepreneurial revolution, largely sparked by the evolution and advancement of technology across all sectors. It has never been easier to start your own business, grow your community and have a global presence and impact.
So why is it then, that as of today in 2022, 99 percent of the $2.2 billion of funds in MENA have been invested in all male-founded teams, with only 1 percent invested into startups that are founded or co-founded by women?
It would be easy to claim that this imbalance is due to women being less interested in entrepreneurship, but this is simply not true.
The male-to-female entrepreneur ratio is much closer than you might imagine – with seven female founders for every ten male founders in USA.
Female entrepreneurship in the UAE grew 68 percent as the pandemic struck and the number of women starting their own businesses outstripped the increase in male entrepreneurship in 2020.
But when it comes to female founders in tech-related industries globally, there really is a gap. Even Apple’s CEO, Tim Cook recently said, “There are still not enough women at the table at the world’s tech firms- including my own.”
However, women in the Middle East have taken great strides when it comes to careers in traditionally male-dominated domain. In the UAE, 61 percent of university STEM students are female and 34 percent of the region’s tech-focused startups are founded by women.
So why are women not getting the funding they deserve, especially given the fact that empirical research clearly shows that female founders can be a massive opportunity for investors.
Female-owned companies generate higher revenue
Research shows that businesses founded by women ultimately deliver higher revenue -more than twice as much per dollar invested than those founded by men.
In fact, VC-backed companies with a female founder performed 63 percent better than companies with all male founders, in terms of return of investment.
Let’s be clear. I don’t want to make this sound like its women VS men, this isn’t about superiority or competing. This is about balance, raw data and changing a perception within a specific sector that currently has a disproportionate male-dominant ecosystem.
Women significantly improve startup company performance
A growing body of evidence shows that organisations with a higher percentage of women in leadership roles outperform male-dominated companies.
Data suggests that investing in diverse founding teams results in up to 25 percent higher valuations. This is a significant statistic for investors.
Influential tennis star, Serena Williams is leading the movement in USA for VC-backed female founders with her early-stage investment fund. Having raised over $110 million for female-led investments, she aims to balance out the playing field with more talent diversity.
Other VC firms have taken note of the higher performing companies that are female-led, and we are starting to see a movement and positive shift towards more balance in the startup funding world.
Women have a larger appetite for growth
One of the key components of being an entrepreneur is the ability to grow a company. Growth may be measured in the form of expansion, new ventures, new markets – a survey showed that 32 percent of female-owned businesses are in active expansion mode compared to 27 percent of male-led businesses.
Twenty-nine percent of female-owned businesses across the MENA region are global enterprises — a greater proportion than their male peers can claim, which is largely based on the fact that women founders do not give up at the same rate as men, and they have the vision and perseverance to grow into markets outside their domestic markets.
Outcome and unicorns
Despite the fact that only 2 percent of all VC funding globally is directed towards female-founded startups, women-led businesses perform incredibly well. On a global scale, female-founded unicorns (a term given to a private company that reaches a value of $1 billion or more) exceeded 133 companies worldwide and continue to grow in 2022. Data from 2021 alone shows a 400 percent increase in the number of female-led companies reaching unicorn status when compared to 2020.
A slate of female co-founded unicorns also went public in 2021. 7 out of the 19 companies that went public had female CEO’s, compared to zero, in 2021.
But clearly, all the arguments in favour of supporting women-led businesses have not been enough to turn the tide among investors and perhaps this is down to the male-dominated culture of many VC firms and institutional investors which is well documented.
However, investors should acknowledge that current market trends and consumer behaviour makes women-owned companies’ lucrative opportunities. And let’s not forget- the data shows they perform better than their male counterparts.
The solution is not for VCs to suddenly start supporting startups simply because they’re founded by women. It’s to weed out the institutional thinking and patterns that prevents VC firms from recognising the great potential of ideas presented to them, even if they are presented by a woman.
If VC’s in the Middle East want to see more Unicorns, let’s start backing the amazing talent of female-founded startups and let the unicorn herd pave its way through the region.
Farah Zafar, CEO and co-founder, Lyvely
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