A record year for venture capital funding – but not for everyone

In 2019, 2.8 percent of funding went to women-led start-ups; in 2020, that fell to 2.3 percent, Crunchbase figures show – and worth noting is the fact that the 2.8 percent figure was an all time high.

What’s more remarkable is the benefits to investors that funding women-owned enterprise brings. We know that investing in women brings a higher return, and a better performance. In a data driven industry, the value for investors cannot be ignored.

At Mindshift Capital, we trail blaze by investing in exciting women-led early-stage technology companies in the Middle East, US and beyond – and with the results that we are seeing for both our investors, and portfolio companies, we are proving that our vision for both is the right one in terms of returns and growth potential.

The Boston Consultancy Group’s 2018 study found on average women raised less than half as much money as their male counterparts, yet they earned $0.78 per dollar invested, compared with $0.31 for the men.

Women are one of the fastest growing segments of entrepreneurship worldwide. In the MENA region, we believe that women own 40-50 percent of businesses  – in the US the figure is around 40 percent and in Europe 30 percent.

Why then, do we only see that paltry 2.3 percent of funds being invested in them? While this is a problem, we also see it as an opportunity – The “arbitrage opportunity” is clear to us in that we constantly see female founders out-performing their counterparts, based on the statistics of underrepresented founders looking for funding.

Given the typical lower valuation pricing and terms, investors can make an outsized return.  Our first fund audit conducted by Frank, Rimerman & Co, LLP validated our thesis – our cumulative IRR through December 31, 2020 was reported to be47 percent.

Investing in women-led companies bring a higher return and a better performance

The gender-lens investment 

Gender-lens investing is a practice of investing with the intent to address gender issues or promote gender equity. With the amount of female founders out there, the lack of funding certainly isn’t down to a lack of opportunity.

Our team at Mindshift Capital has been investing in early stage women-led companies for the last eight years, and we understand the market opportunity as well as how to work with female founders. I founded the first women’s angel group in the MENA region in 2013, the Women’s Angel Investor Network (WAIN). 

Our inaugural fund at Mindshift, launched in 2019, is currently invested in nine portfolio companies in five countries, and all with female founders/cofounders. We have an amazing global network that enables a constant deal flow, due to the unique nature of our fund. We are screening over 1,000 women-led companies a year, attracted to us as we invest exclusively in women-led early stage technology companies.

Given what we know about the out-performance of female leaders, coupled with the higher IRR for investors, it’s important that we see more women-led VC funds, alongside a rise in opportunities. Many gender-lens funds are new, and the founders of such are emerging leaders.

As an entrepreneur myself, after starting my career on Wall Street, my shift into angel investing, prior to founding Mindshift alongside a global group of female partners means that we have a strong appeal to companies looking to work with a fund that understands both their needs and of course, the potential in their enterprises.

There are many data points that validate the financial opportunity of investing in women. Women “ultimately deliver higher revenue – more than twice as much per dollar invested,” a Boston Consulting Group study reported.

Silicon Valley fund First Round Capital found that “companies with a female founder performed 63 percent better than their investments with all-male founding teams” And whilst our fund is not yet closed, it has been great to see the resilience shown by all of our companies in the face of the pandemic year.

We have seen opportunities to pivot, growth in new markets (specifically KSA) and a positive outlook on the rest of 2021, with the tailwinds that these new opportunities have brought the companies. The future is bright.

At Mindshift, our portfolio focusses on edtech, healthtech and foodtech. Historically, we have seen that traditional VC funds have been less likely to invest in certain areas of healthtech, for example, simply due to a lack of understanding of the issues, and the importance of the solutions.

Ironic, when the addressable market size is as large as 3.5 billion people on the planet. Currently, our portfolio companies are working on prenatal testing solutions to avoid potential pre-term births at NX Prenatal, diagnosis of middle-ear infections that negate the use of antibiotics with OtoNexus Technologies, easy urinalysis for general wellness and health at Vivoo, alongside leisure and education opportunities for families with Qidz and Little Thinking Minds.

When women do better, the world does better and we are finding that more companies are starting up with a view to societal impact

Diversity benefits everyone 

At Mindshift, we invest in founders with a vision for impact and making things better. We have seen a monumental shift this year in general consumer behaviour and routine. A focus on balance and wellbeing is being seen across the board, and in itself is not a gender issue. Human centered business models are growing and the opportunities for both founders and investors in this space is vast.

When women do better, the world does better and we are finding that more companies are starting up with a view to societal impact. Research shows that a positive relationship between a VC and their portfolio companies results in higher success rates for all involved. Some may prefer a ‘hands off’ approach, but we find that this type of involvement is key to the objectives of all parties.

The VC world needs to move on from any legacy thinking around funding female-founded companies, and recognise the wider benefits alongside the obvious IRR. There is certainly no shortage of potential amongst the thousands of companies we screen at Mindshift, and certainly not in the MENA, where we see a wealth of female graduates in STEM and Computer Sciences as an example, particularly in Lebanon and Jordan.

Heather Henyon is the founding general partner of Mindshift Capital, a global venture fund that invests exclusively in early stage women-led technology companies