Rise Up, Egypt’s first major entrepreneurial summit held in Cairo on November 24- 25 was a resounding success. It brought together many different and important players from the entrepreneurial ecosystem: investors, accelerators, corporates, civil actors and entrepreneurs. Between the panels, talks, workshops, hackathons, makeathons, and ideathons, it was hard not to be inspired or to walk away without better ideas and connections. Entrepreneurs are changing Egypt for the better.
What will female entrepreneurs add to the ecosystem as it develops?
The female representation at Rise Up seemed strong, without knowing the statistics on speakers, entrepreneurs and such. The summit even took a session to ask, “What are the challenges that are facing women in entrepreneurship?”
Gender differences between men and women are stubbornly persistent when it comes to market work in general. There are large differences in the participation in the labour market, the types of occupation men and women choose, and the incomes they receive for the same work.
These differences by gender are greater in the Middle East and North Africa than anywhere else in the world.
The differences between female and male entrepreneurs, however, are a bit different. Unlike in the labour market, where females are almost always at a disadvantage, the case is not so one-sided when it comes to females in business.
It is true that women are less likely to become entrepreneurs. It seems that’s because people, male or female, who know an entrepreneur are more likely to become one. Surveying entrepreneurs in 35 countries has shown that women are less likely to know an entrepreneur or to have a role model in their social network. This is true of entrepreneurs across different stages of development: discovery, start-up, and young enterprise stage. This means that exposing women to more entrepreneurs is likely an important part of encouraging more women to becoming entrepreneurs.
Encouraging more women to become entrepreneurs or having more females in business is no longer the right thing to do, but rather the bright thing to do.
When more women are in company leadership, companies perform better. Among Fortune 500 companies, for instance, boards with high female representation experience a 53% higher return on equity than those with the least female representation. They outperform in sales by 42% and have a 66% higher return on invested capital. A McKinsey & Company study found similar results with a 41% difference in return on equity and 56% advantage on operating results. Most studies show the same result; more female business leadership is better for performance. The difference is the degree to which having more female business leaders translates to an advantage.
More female business leadership also reduces the risk bankruptcy. Having at least one female director reduces the chances of ending up bankrupt and out of business by 20%. Having more women on the board reduces the risk even more. The risk reduces until the number of female and male board members equal.
The thinking is that female business leaders are more successful because they are less constrained when they make decisions. Women are more likely to “rock the boat” when taking decisions than men. Men more prefer to make their decisions using rules, regulations and traditional ways of doing business. Their female counterparts don’t feel as constrained. Women are more likely to question decisions, be inquisitive and see more possible solutions. Male counterparts are more inclined to nod decisions through in the boardroom.
Women are more successful in the investment space. For instance, women-owned alternative investment funds (hedge funds, derivative contracts, commodities, private equity and venture capital businesses) have been shown to outperform the average, with a compound annual return of 3.6% compared to the 3% loss of the for the all-inclusive HFRX Global Hedge Fund Index (the global industry standard for measuring performance of the hedge fund industry) over the five year period ending in September of 2012. Between 2000 and 2009, female run hedge funds generated an average annual return of 9% while male run funds raised an average of only 5.82%.
It seems this is because women have more patience while men make swifter decisions. This pays off. With less turnover in their portfolios, they deliver more consistent results in the longer-term. Women do more research and are thus more comfortable holding onto their investments longer. The evidence suggests they are more risk adverse earning less in boom times but loosing less in busts, for an overall performance that beats the average.
Women are also more inclined to make decisions by taking the interests of multiple stakeholders into account. Many studies have shown that when approaching decisions, women are also more likely to use cooperation, collaboration, and consensus building when dealing with complex decisions. This has been shown in the outcomes of their decisions and even how their brains work differently than men when making a decision.
The consistency of these results across studies has led many investors in the world to increase their exposure to female decision makers in business. The summit’s session focused on the decision-making advantages of having women in business. The focus was less so on the potential for increased profits and reduced risks that come with female business leadership. As the Egyptian entrepreneurial space develops, it seems to me, that more female entrepreneurs is not the right thing to do, but the bright thing to do.
