Africa ranks first in women-led VC-backed businesses ratio

An overall global perspective and ESG Means news

Today I\’m giving attention to an important matter: women-led VC-backed businesses – how representative they are and where they are. As investors aim to diversify their portfolios, and LPs demand diversity from funds, where can we spot the opportunities?

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Cambridge Associates have been looking to improve the diversity of their hedge funds, and invested companies in various categories, such as ethnicity and gender. They aim to accelerate the flow of capital toward realms where \’explicit structural barriers\’ have been holding investment away. The company defends that \’non-diverse\’ managers have overseen opportunities in these \’blocked\’ spaces and argue that diversity in funds and funds\’ investments might unlock profitability still unseen.

LPs\’ demand for diversity has increased, and managers must find ways to top their commitments with these new requirements. The Senior investment director of sustainable and impact research of Cambridge Associates, Chavon Sutton, recently stated in an interview with HFM global that:

Rather than avoid diverse managers, we lean in, recognizing the long-term portfolio benefits of investing early with strong managers

We delve into what currently VC-backed company management boards look like worldwide. My main interest was to visualize which global regions have more or less gender equality, evaluating where investors might have an easier or harder time finding and incentivizing diversity. The chart below was developed using Pitchbook data regarding management members of VC-backed companies in various global regions. The charts numbers are in thousands:

Starting from the bottom, we find that Asia and the Middle East are the lowest-ranked regions regarding the proportion of men and women-led businesses. Europe and Latin America have better ratios of women-led companies, but they are still under average. In total numbers, however, there is a huge gap: the first overpasses by twelve times the number of VC-backed companies of the latter.

The overall percentage is 19 vs. 81% percent men-led businesses. The total number of companies that are a part of this samling is 360 thousand.

Performing better than the overall score, we find, from the bottom up, Oceania, North America, and Africa – leading the ratio of women and men-led businesses. Half of the women-led VC-backed ventures are in North America, and 40% of the men-led ones.

Our ranking leader is Africa, crowning more women leaders than any other region in the world compared to its men-led businesses. The flip side of the coin is that, although having the most equitable share of ventures between genres, Africa is the continent with the smallest number of ventures when compared to every other one presented.

If fund managers are not looking only at managers, but at founding members and CEO positions, they might find an even smaller opportunities path. The chart below shows us that at the top there is a 2p.p. decrease in companies founded or led by women. The general overall participation declined four percent, and from 19 percent managerial participation, women-found or CEO representation decreased to 14%.

One region also changed positions in the rankings; could you spot it? North America changed places with Oceania, and Europe became above average:

Our overall conclusion with these metrics is that there is a fantastic room for opportunities to increase women-led ventures across the globe. Even the leading regions would need to more than double their women participation, so it starts to even out with men-led businesses. For investors looking to cause a positive impact outside central regions, such as Europe and North America, Africa is an excellent lab to start from.

Tomorrow we\’ll dive into

• Women-led funds

• Women-led profitable ventures

• Investors backing these ventures

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