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Defund the VCs? A data-driven take on gender diversity

Frst is a seed-stage VC firm focused on supporting a new generation of French entrepreneurs with global ambitions.

Few VC-backed companies have a woman as co-founder, that’s a fact. A fact often explained with the hypothesis that VCs don’t want to give money to women, consciously or not.

This hypothesis is so deeply rooted in people’s mind (Make them swear to stop! Replace them with algorithms! Only deal with female VCs so they are not biased!) that we almost convinced ourselves that we were those terribly biased human beings everyone is talking about.

It’s not just about feeling good, it’s also about money. As seed-stage investors who often invest pre-product, we have no traction to analyze and base 99% of our decisions on people. Any bias we could have that makes us pass on a great company can literally cost us billions.

We dug into our data which, we think, are quite similar to the one of our peers. Good news is we don’t appear to be biased, bad one is the problem is way deeper and harder to solve than if we were.

There are more women in our deal flow than in the c. 3k software companies created each year in France

As France-focused investors, we systematically look at each and every software company created in the geography (3 153 over the last twelve months). A detailed analysis we ran showed that 16,9% of these companies were co-founded by at least one woman. Far from 100%.

The next thing we did was to compare this number to the occurence of woman-cofounded companies at key steps of our deal flow:

  1. First contact (20mn over the phone)
  2. First full meeting (1 hour, with several members of the team)
  3. Investment made (6 over the last 12 months)

16,9% of the 3 153 software companies created in France over the last twelve months were co-founded by (at least) a woman. This number is inferior or equal to what it is at any moment of our deal flow:

  • At step 1 (first contact), 18,3% of the companies have a woman co-founder
  • At step 2 (first full meeting), 17,4% of the companies have a woman co-founder
  • And finally, 1 of the 6 french software companies we invested in over the last 12 months have a woman co-founder. It means 16,7%

A different conclusion would have been surprising to us. But it unfortunately does not mean there is no problem.

The real problem is pre-company creation

Only 16,9% of the 3 153 software companies created over the last twelve months in France have a woman co-founder. Said differently, there are 4 times more software companies created by men only than diverse ones in France.

It’s obviously a very deep problem with intricated causes.

An easy one lies in the fact that women tend to choose less technical studies than men. While real (and linked to the following point) this reason is obviously not sufficient, since software has eaten the world and many male founders of software companies have non-technical backgrounds.

More structurally, some culturally feminine traits (e.g. old Disney princesses) traits may not mix optimally with the way entrepreneurship is perceived and, for better or worse, works. Paul Graham famously said that “running a startup is like being punched in the face repeatedly”, and we don’t know a single founder who could say he is wrong.

A problem without a solution is a poorly stated problem

Working on those cultural traits seem to be the highest impact thing we -as an industry- could do. Things are changing already (Disney updated its princesses) but there is still a lot of work to be done.

In the next weeks, we will announce a program dedicated to pre-creation women. It obviously won’t solve the problem nor fully neither instantly, but do things that don’t scale, as they say ;)



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