All-women startup teams receive less than 3% of the global venture capital funding. All-men teams, in turn, collect almost 90%. This phenomenon is called the gender investment gap.
Lucy Chow discusses this disparity, its implications and offers actionable insights on how to address it. Lucy is the General Partner at the World Business Angels Investment Forum and Secretary General for the Global Women Leaders Committee. She moved to Dubai 16 years ago and has been instrumental to shaping and growing the startup ecosystem in the UAE.
Lucy also offers practical tips for women interested in entering the investment space.
What does the funding landscape look like for women-led startups?
PitchBook has just released a new report, and it is disheartening. In the US, women founders raised only 1.9% of all venture capital funding in 2022. It is disheartening because this number is even worse than in 2021, which was 2.4%.
One can blame the global economy downturn but first and foremost, it is an indication that investment in women-led startups is still perceived as high-risk.
How is the situation different Dubai and the UAE?
In the last few years, Dubai has attracted a lot of international businesses. It offers a huge addressable market. For investors, the UAE and Dubai are the gateway to the entire MENA region. This makes Dubai as a location so appealing. Yet, the situation with funding for women founders is no better than in other parts of the world. Women-led startups collected about 1% of the overall venture capital funding in the UAE in 2022.
However, I do see a positive trend. There's a strong belief among funders in the region that we need to work together more collaboratively to uplift the entrepreneurial ecosystem.
What are the reasons behind the gender investment gap? How can we address it?
It's a systemic issue. For instance, female investors are twice as likely to invest in female founders than their male counterparts. What does it mean? Which tangible steps can we make to rectify this disparity?
We need more women in the decision-making roles in the venture capital industry, including general partners of venture funds and angel investors. With that, we will get a different perspective on the investment landscape, on the deal flow. Only this way we can channel more capital into women founders' hands.
What are the benefits of investing into women?
Women control 20 trillion dollars worth of spend. Hence, investment into in women directly benefits their communities and their families. It comes with a dramatic economic multiplier effect for a country. Economically speaking, it doesn't make sense to leave women out.
As we saw during Covid, more women dropped out of the workforce than men did because women are still primary caregivers, whether it's for children or the elderly. This had a strong negative effect for countries.
When it comes to economic growth, I advocate for diversification of investing as well as diversification of investors. I encourage women to enter venture capital industry.
How can women enter the investment space?
One way to start would be to become an angel investor.
If you are pursuing a career in this space, make sure that you have male allies. At the moment, most decision makers in the venture capital industry are male. Yet, many men do want the diversification in their industry and act as allies. Find your male ally.
Hone your skills necessary for investing. Learn about this whole process. One way to approach this learning journey is to talk to as many investors as possible. Use your social network and find a sponsor or someone that will open up opportunities for you.
How is a sponsor different from a coach or mentor? A sponsor is someone who will mention your name in a room full of opportunities.