Introduction
Pakistan’s startup ecosystem has seen significant growth over the past few years. Despite the current economic slowdown, stakeholders remain resilient and forward-thinking. This analysis delves into the gender dynamics within the investment landscape, specifically focusing on female-founded and co-founded startups.
Understanding Female-Founded and Co-Founded Startups
Definitions
- Female-founded startups: Teams with one or more female founders.
- Female co-founded startups: Mixed-gender teams with at least one female founder.
Investment Overview
Gender Lens on Startup Funding
In 2021, female-founded and co-founded companies secured 34% of total startup funding, narrowing the gender funding gap. However, the funding slowdown in 2022 disproportionately affected these startups, reducing their share to 8% in Pakistan and under 6% in the MENAP region. Globally, female-founded startups raised only 19% of the total funding.
Gender Lens on Deal Count
Deal Count Analysis (2015-2022)
From 2015 to 2022, female-founded and co-founded startups raised around 20% of the total publicly disclosed funding. However, this percentage varied annually. Female-founded startups consistently closed about 3 deals per year, even during the funding surge in 2021. In contrast, female co-founded startups saw an increase in deals from 7 to 18 between 2020 and 2021.
Addressing Biases
The data highlights inherent biases within the ecosystem. There is a need for investors to recognize the value of female founders and to understand the additional challenges female-only founding teams face. In 2022, female co-founded companies experienced a 43% drop in deals, compared to a 27% decrease for male-founded companies.
Ticket Size Discrepancies
Funding Cycles and Average Ticket Size
We divided the funding cycles into two periods: 2015-2019 and 2020-2021. During 2020-2022, for every dollar invested in a male-founded startup, female-founded and co-founded startups raised only 29 cents in the angel/pre-seed round and 55 cents in the seed round.
Sector Comparison
E-commerce and fintech are the top-funded sectors across all gender groups. However, female-founded/co-founded startups often set lower valuations, potentially resulting in smaller funding amounts.
Addressing the Funding Gap
Key Questions
- Do female-founded/co-founded startups set more realistic valuations?
- Are male founders rewarded for higher valuations?
- How do gender groups determine their funding ask differently?
Collaborative Solutions
WeRaise Summit
The WeRaise summit, a program by the World Bank and Women Entrepreneurs Finance Initiative (We-Fi), implemented by local and international partners Invest2Innovate, efino, and Spring Activator, brought together various stakeholders to address gender funding gaps. The summit emphasized diversifying funding sources and promoting transparency through 1-on-1 networking sessions.
Conclusion
Creating an inclusive startup ecosystem requires collaborative efforts from all stakeholders to address pipeline and behavioral challenges. By fostering a supportive environment, we can bridge the gender funding gap and promote equitable growth in Pakistan’s startup ecosystem.
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If you’re a champion of gender lens investing and want to join us in moving the needle on the number of deals being closed by female founders, just write to us at armeen@invest2innovate.com.