Insights: Why women make natural entrepreneurs, but rarely get funded 

Why don’t we have more female entrepreneurs? You might think that you read about lots of women leading their own business, but the reason you do is because they are newsworthy, not because they are numerous. Between 2014 and 2020, data from MAGNiTT on startups in the MENA region shows that approximately only 2 per cent of startups were founded by women, another 2 per cent were co-founded by men and women and the remaining 96 per cent were founded by men. Look outside the region and you realise that the barriers to female participation in the startup ecosystem are pervasive. Many women, especially in developing economies, do not even have a bank account (over one billion females worldwide do not own a bank account) and might not even have the right to own land (40 per cent of countries have restrictions in place when it comes to female ownership of property).

But even in more developed parts of the world, getting a startup funded is easier, it seems, if you are male. Why is that? I suggest that one reason is that funders suffer from unconscious bias and gender assumptions. Traditionally, men are portrayed as being more successful and more ambitious than women. They dominate the list of famous entrepreneurs and tend to define success in monetary terms. So, it has almost become a self-fulling prophecy that men attract more funding than women.

It doesn’t help that most funders are themselves men. Female decision-makers form less than 10 per cent of the venture capital industry. Most bank credit committees, who make the decisions on lending money, are also full of men. People tend to like/trust/want to do business with people who look like them – there’s an academic word for this, homophily. What we need is more women in these key financing roles, so that more women entrepreneurs can get funded.

The lack of female startups being funded makes no sense to me at all. After all, there is a growing body of research that suggests women make better entrepreneurs than men. Surely, women are less likely to lose the money that has been invested in them? Women take more risk-adjusted decisions than men – put into stressful situations, the science shows that women take less risk than men.

Studies have also shown that women often make better leaders than men. When women become leaders, they provide a different set of skills and imaginative perspectives. They are more empathetic, communicate better and handle crises better. They are more aware and emotionally intelligent about the human side of the business. These are qualities that give them a huge advantage as entrepreneurs.

Finally, women are good at multitasking, and successful in building connections and social networks, critical skills needed in any startup.

Yet, even with all these advantages, the reality is that female entrepreneurs are still facing barriers to funding. Many say that they struggle to be taken seriously, especially by male-dominated venture capitalists and banks. What can we do to change this?

I am proud to live in a part of the world where female entrepreneurs are celebrated and supported, and where starting a business has never been easier. The UAE has embarked on several new initiatives that foster entrepreneurship and encourage business formation, including letting foreign entrepreneurs be 100 per cent shareholders in a locally incorporated business, making long-term residency visas available, and facilitating business formation. The Dubai DED Instant License permits entrepreneurs to get a licence in five minutes with no pre-approvals. Hardly surprising then, that the UAE has been ranked first in the in Middle East and fourth globally in the Global Entrepreneurship Index (GEI) 2020.

Women have always been important agents of change and harnessing the potential of women entrepreneurs is crucial for economies that are sustainable and inclusive. If you are female, have a potential business idea and have been sitting on the fence about starting your own venture, then why don’t you use Women’s Entrepreneurship Day as encouragement to get out there and just do it? And finally, let’s not forget that we also need more women to help other women make their business idea a success. So, if you are a woman reading this – maybe this is the time for that new career in venture capital?

Professor Heather McGregor CBE is the provost and vice principal of Heriot-Watt University Dubai