Are women-led startups receiving their fair share of funding?
Almost every woman that I have spoken to in the startup ecosystem agrees to a regional feeling of women entrepreneurs facing bias when it comes to fundraising. Here is an attempt to unearth what’s going on behind this general, yet an overwhelming feeling of gender disparity.
Let’s talk numbers first
We’ll set a comparative example of the US, which is generally deemed to be more progressive when it comes to funding female entrepreneurs.
According to Pitchbook data, in 2018, startups in the US with only female founders took 2.2% of the $130 billion venture capital deployed. Moreover, when looking at startups with at least one female founder, this number was 12%. To put things into perspective, female founders account for 36% of all American entrepreneurs.
Closer to home, funding numbers are very similar — showing that the MENA region is almost as progressive as the US. Let’s have a look.
According to multiple sources, 11% of fundings in 2018 went to startups with at least one female founder in the MENA region, which is not far from the 12% in the US.
Moreover, of all funded startups in MENA, those with at least one women founder accounted for 24%.
This showcases the progress we’ve made in the region compared to one of the most developed startup ecosystems in the world.
What do these numbers reflect?
We are all aware of the research out there: women-led startups or companies that have diversity in senior leadership have higher returns per invested dollars. Percentages may differ, but all research points to the same result. The main issue we are seeing across is that women receive way fewer investments.Nadine Mezher, co-founder of Sarwa
“We are all aware of the research out there: women-led startups or companies that have diversity in senior leadership have higher returns per invested dollars. Percentages may differ, but all research points to the same result. The main issue we are seeing across is that women receive way fewer investments.” said Nadine Mezher, co-founder of Sarwa.
So, while the numbers above show we’re almost on par with the US, women across the world still have a long way to go to get the 50-50 funding ratio. Why don’t we have this yet, and what is it going to take to get there?
To answer this, we need to look deeper into how many women entrepreneurs are in the tech field, and how many of them have tried to launch their startup but failed due to lack of funding support. Sadly, data regarding women entrepreneurs who haven’t received funding or have a failed startup is nearly impossible to get in the MENA region at the time of this writing.
However, from the data available, we know that only 14% of startups in popular tech sectors such as artificial intelligence, machine learning, augmented reality, FinTech, data analytics and e-commerce, have at least one female founder.
Hence, while women entrepreneurs are fewer than their male counterparts within the ecosystem, they are also far fewer in the tech sector, which is currently booming and is receiving the major chunk of investor capital.
So, many investors might not have the experience of working with female entrepreneurs that can make them hesitate before injecting capital.
Nadine adds that “The main reason is the VC and investors world is still dominated by men, and they invest with a gender lens already. As humans, our intuition leads us to choose what mirrors us and what we see as familiar. This is what is happening here, and it is more enhanced in the region for cultural reasons, even though we have more women venturing into entrepreneurship.”
Women get more push backs during pitches and get judged on performance while men are judged on potential.Nadine Mezher, co-founder of Sarwa
The recent entry of women entrepreneurs to the tech scene is simply because many of them did not opt for tech fields in university or enter the sector in their early careers. If we look at the number of women who have studied in the tech field, the numbers have only recently started to grow, and classrooms in tech fields today still do not reflect a 50-50 gender ratio.
So, if women are not making up 50% of the startups in the tech sector that is seeing investors pour in capital, can they expect to still get 50% of the funding? Clearly, that’s a no, as it could be discriminatory against men.
How can we get to equality in funding?
There are people — men as well as women — who discriminate against women. However, every person irrespective of gender faces discrimination on some level or another. Be it the person’s height, colour, education, behaviour, eating manners, dressing sense, intellect and so much more — every person has faced rejection on some level. Entrepreneurs more than many others.
Blaming that experience of rejection on gender bias may in many cases be a true reflection of reality. But sometimes it is not. And it is in these instances that it can become dangerous to an entrepreneur’s ability to find aspects for improvement.
This can be fixed and I am optimistic that we will see changes in the right direction: by brining more awareness, having more women in the VC world, and starting with early education. Regardless, a company with a good product and a good market fit will always find its way to grow. I truly believe we have come a long way and there is no better time than now to start a business.
For the short term, I’m inclined to say that a woman’s grit, the right approach, a great idea, product-market fit, and a strong business plan can overcome the concerns of even the most sceptic of investors.
Long-term numbers are looking better because of a simple math rule: the more female entrepreneurs enter the tech sector, they form a larger proportion of tech entrepreneurs, and their probability of receiving investment goes higher.
To reach funding levels that are a close reflection of the gender of entrepreneurs is an ideal state, which will take decades to reach according to the World Economic Forum. However, the fact remains that year-on-year we are seeing progress in funding to female entrepreneurs.
The only way forward is for more women to showcase their ability, and prove it with success. The more experience and evidence investors see, the more open they’ll be in working with women entrepreneurs.