Women start-up funding space lighting up?

Pakistan’s start-up space is booming and shining especially with the surge in funding in the last couple of years. 2021 has seen funding in start-ups skyrocket, crossing $200 million in less than nine months. However, when it comes to women-led start-ups, the gender disparity shows a stark comparison.

Many start-ups need funding to scale and survive, and women should be able to get equal opportunities to seek finances for their businesses. However, lack of access to capital is a major challenge for female entrepreneurs in the country and an ongoing trend. According to i2i’s Deal Flow Trakker for 2015-2020, 75 percent of start-ups that raised investment during the period were led by males, while only 9 percent of start-ups in Pakistan that raised investment had female founders with 15 percent mixed-gender founding teams.

In terms of the amount raised, the situation is even worse with female-led start-up funding accounting for only 2 percent of the total $178 million raised during the time period. Another finding of funding for female-led start-ups was that female-founded start-ups often raise investment from local angels, VC, incubators, and accelerators, unlike their male counterparts. Also, during the period (2015-2020), the rounds raised by female-founded start-ups were considerably smaller than those raised by males and were usually early-stage investments such as pre-series.

Globally as well, funding in women-led start-ups has been peanuts, which further deteriorated in 2020 during the pandemic. In the US alone, the funding decline in women-led start-ups was more in later-stage rounds and less in earlier-stage funding.

The start-up space in Pakistan, however, has seen a couple of significant deals this year for sole women-led start-ups. Pakistan’s female fitness start-up AimFit raised $1 million in a seed round. And recently Oraan, a fintech start-up by two women co-founders formalizing ROSCAs has raised $3 million in funding, making it the first women-led start-up in Pakistan to raise seed funding in the fintech space and the first female-led start-up to raise such an amount.

So, while these investments raised by women-led start-ups are just a couple of deals, it puts Pakistan out there. The overall spike in funding for Pakistani start-ups is not random. A lot of things are going in Pakistan’s favor.

Talking to BR Research, Halima Iqbal - co-founder and CEO of Oraan said that Pakistan is one of the very few markets that have high internet penetration; a massive population with a huge share of young people which gives entrepreneurs including women so many problems to solve. She emphasized that coming up with solutions for 50 percent of the population makes economic sense. “Committees work very well in the short term but we also need investment opportunities for women to address their long-term needs; so the funding will be used not only to scale our main product i.e. the ROSCAs committees but it will also be used to two related verticals on the micro-wealth and credits side”, she added.