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Venture Capital Funding: What Women Can Bring to the Table

Venture Capital Funding: What Women Can Bring to the Table

By ASA Staff Writer | April 15, 2019

At a time when women have forayed relentlessly into fields previously dominated by men – from politics to entrepreneurship and technology – there remain some industries where females are very much the minority.

One such field is venture capital (VC) funding.

According to networking community European Women in Venture, only about 9% of investing partners for seed and early-stage phases in Europe are women.

Among US venture capital firms, only 9.65% of decision makers are women according to the latest study by Axios. Specifically, this translates to 105 women decision makers out of 1,088 from firms that had raised $100 million in at least one funding from 2014-2018.

Though the number of female investors in the US has risen through the past few years –  with 8.93% in 2018, 7% in 2017, and 5.7 in 2016 – admittedly, the increase has been slight.

The statistic is pretty much the same for the MENA region.

A man’s world: the implication

There are male domination of VC enterprises has some disadvantages.

Because it is male-dominated, the sector only capitalizes on the male perspective. This means that male investment partners and decision makers are wont to sign checks for startups with business ideas that they feel strongly about or at least are familiar with. Therefore, it is more likely that a male investor will put his money into a fintech app rather than a female-founded online marketplace for beauty products.

In the article titled “Why We Need More Women in Venture Capital”  by Melissa Tsang published in www.referralcandy.com in May 2014, Jane Park, CEO of beauty e-commerce startup Julep shared her sentiments.

“We had people saying, ‘You have a fundable idea and a terrific team but I only do one deal a year and I don’t want it to be beauty,’” she said.

The dangerous thing about this is that women-led startups with very talented people in their teams, future-ready innovations, and brilliant ideas are overlooked in the funding game.

The result: few of them get the funding they need and deserve.

In fact, according to a piece by Grommet CEO and co-founder Jules Pieri for the Harvard Business Review, women entrepreneurs only receive 4.2% of VC funding.

Under this scenario, the market misses out on otherwise great innovations and services.  What they have at their disposal are those mostly catering to only half of the market.

With greater female representation in VC companies however, there will be greater understanding of pain points running across multiple markets. These include subgroups composed of teenaged girls, pregnant women, mothers, working women, and women in general. Female investors are aware of the challenges faced by working mothers or the difficulties of shopping for clothes and make up at a brick and mortar store in the midst of a busy work week.

With women in key positions, VC firms can better spot the more promising startups addressing women’s needs and eventually grant them the funding they need.

Besides, it has been proven that enterprises founded by women outperform those established by men.

A study by the Boston Consulting Group discovered that on average, startups with women founders or co-founders acquire only half of the funding received by male-founded startups. Yet, these same women-led new ventures earn higher revenues.

McKinsey and Company have a similar observation. It said that companies whose leadership consists of 30% female, generate net margins which are 6% higher than those of companies with zero female leaders.

The good news

The good news is that mindsets are now shifting.

Crunchbase indicated that among the VC firms established from 2016 to 2018, 21% had at least one female founder. This is triple the figure for leading VC companies.

The intelligence provider added that VC enterprises with female founders and co-founders have a higher proportion of female investors in their ranks. They also invest in women-led ventures at a bigger rate.

In the US, VC firms are now welcoming women partners into the fold when as recently as four years ago, 75% of venture funds in Silicon Valley did not involve a woman partner.

Furthermore, the non-profit organization All Raise was launched in the spring of 2018. Its aim: increase the number of women writing checks for startups.

Women in MENA are doing their share. More of them are entering the VC investment arena while some are providing support by shoring up the VC funding ecosystem for the women.

Among those serving as managing partners or assuming decision-making positions at VC firms in UAE are:  Elissa Freiha, founder and director of WOMENA, an all-female angel group; Heather Henyon, co-founder of Women’s Angel Investor Network which invests solely in female-founded startups; Najla Al-Mifda, general manager of Sheraa; and Noor Sweid, chief investment officer of Dubai Future Foundation.

Regionally, this list includes Ambar Amleh, co-founder and chief operating officer of Ibtikar Fund, Palestine; Dina El-Sehnoufy, chief investment officer of Flat6Labs, Egypt; DouniaBoumehdi, general manager of Maroc Numeric Fund, Morocco; and HadyahFathalla, executive director of C5 Accelerate, Bahrain.

The VC sector may still have a long way to go. But the fact is, women investors are now getting the greenlight to take a more active part in funding startups.

ASA Staff Writer

saira@datamax.ae

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