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Thu 10 Oct 2019 04:16 PM

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Women founders are magnets for company investment, say UAE experts

Gender diversity, in particular, leads to diverse views that facilitate decision-making and enhance performance

Women founders are magnets for company investment, say UAE experts
Areije Al Shakar, the female director of Bahrain’s Al Waha Fund of Funds, said the Kauffman Fellows study has “interesting implications” for the Middle East.

Industry experts in the UAE have strongly backed a report that found that start-ups with female founders raised 21 percent more in venture capital (VC) funding than companies with all-male teams.

According to the recent study released by the US-based Kauffman Fellows Research Center, companies with at least one female founder get $23 million on average in VC investment in the third- and fourth-round raises, compared with $18 million on average for all-male teams.

The analysis, which used data from more than 90,000 US venture-backed companies from 2001 to 2018, chimed with local analysts.

“There is compelling evidence, further supported by the recent findings of the Kauffman Fellows Research Center, that top management teams with greater gender, international experience, and educational diversity have a significant positive impact on business performance,” said Wes Schwalje, COO of Dubai-based research firm Tahseen Consulting.

Gender diversity, in particular, leads to diverse views that facilitate decision-making and enhance performance, Schwalje said.

Balance profitability vs growth

Following the recently botched IPO of American office space firm WeWork, investors are keeping a close eye on how companies balance profitability versus growth, the COO said.

“A top-notch, diverse management team has a significant signaling value for investors who foresee that higher quality decision making could avoid the management missteps that led to many of this year’s underwhelming exits.

“For this reason, it is no surprise that diversity has become an increasingly important investment criteria and will likely become even more important,” Schwalje said.

Areije Al Shakar, the female director of Bahrain’s Al Waha Fund of Funds, said the Kauffman Fellows study has “interesting implications” for the Middle East.

"This research has strong implications for the burgeoning VC community in the Middle East, which is a surprising global leader in start-up diversity. At one in three, the number of female-founded start-ups in the region is far higher than in more established start-up hubs, while our VC community is still very much in development,” she said.

"With companies like WeWork in the spotlight, VCs around the world are taking an increasingly careful and grown-up approach to their investments. A growing focus on factors like diversity, which are being taken into account like never before, could stimulate some much needed VC growth here,” Al Shakar said.

Big ticket dearth

The latest report by event organiser Arabnet, in partnership with The Mohammed Bin Rashid Establishment for SME Development (Dubai SME), analysed 1,423 regional investments in start-ups across the MENA region last year and found that only 14 percent of deals were with start-ups founded by women.

While 2018 saw the launch of technology funds focused on women, such as Mindshift Capital, which invests in women-led early-stage tech businesses at the post-seed, and accelerator programmes to support female entrepreneurs such as Womentum, the Arabnet report also found that more still needs to be done as “very few of the start-ups with female founders raise big-ticket deals”.

Dawn Metcalfe, founder of Dubai-based workplace culture firm PDSi MEA and author of the ‘HardTalk Handbook’, she isn’t surprised by the new that start-ups with female founders raised 21 percent more in venture capital in the US.

“By the time a female founder gets to the stage where they are actually raising cash, I imagine they would have to go through an awful lot more than men would have to get to that stage. They would have a lot of tenacity and experience.

“It’s like the dancer Ginger Rogers; she did everything Fred Astaire did, but she did it backwards and in heels,” said Metcalfe.

A long way to go

Despite the encouraging research from Kauffman Fellows, female founders raised 2.2 percent of all capital dollars in the US last year, according to research firm Pitchbook.

Currently, less than 10 percent of decision-makers at VC firms are women and 74 percent of US VC firms have zero female investors, Pitchbook said.

Until those numbers begin to transform, it’s likely little progress will be made on closing the funding gap.

Jane Valls, executive director of the Dubai-headquartered GCC Board Directors Institute, strongly advised local boards to uphold ‘diversity’ as the key to company success.

Valls said diverse teams produce better results and the same is true of boards.

“Gender diversity brings fresh and unique perspectives and new insights to the board, “ she said.

Valls also commented that gender diversity has been proven time and again to enhance board performance and board dynamics, as well as improve strategy and risk oversight.

“With only two per cent of board positions in the Gulf filled by women, boards in the region are missing out on a big opportunity,” she said.