3 Ways to Close the Gender Gap in European Startup Fundraising
Progress been made but there’s still a huge gap in gender parity within the venture capital system
As companies like Skanska and Qantas have recently appointed their first female CEOs, it appears that women at last have begun to secure seats at the boardroom table. However, when it comes to the venture capital ecosystem, the gender gap is very much alive and thriving.
In 2022, 118,000 verified startups across Europe raised €81 billion. Despite this, all-female founding teams were given only 0.9% of the total European capital invested that year. Adding males to the founding team immediately boosted this number to 12.3%, but businesses with an all-male founding team still received a staggering 84% of VC funding.
There is no doubt that new opportunities have opened for women globally. But we should remember that gender stereotypes and discriminatory social norms remain at the core of most patriarchal societies. The fact is that the gender gap is not currently closing. So, what are the obstacles and what can be done about them?
The Unspoken Gender Barriers Creating a Female-Only Glass Ceiling
The first significant hurdle is a combination of bias and stereotyping. The venture capital industry has always been a male-dominated space with long-held stereotypes that must be challenged and dismantled if the industry ever hopes to see true gender equality.
Another roadblock these founders face is a lack of representation. Startup magazine Sifted reports that only 15% of general partners (GPs) at European VC firms are female. They also have less access to capital compared to their male counterparts, with the same report noting women GPs have access to just 9% of total assets under management. This puts women at a severe disadvantage when they pitch their startups to predominantly male investors.
Another difficulty that often hides in plain sight is sex discrimination. Do a little digging and you’ll find that research shows women are asked different questions than men, even when all other parts of the pitch are the same. For instance, at a TechCrunch competition, it was noted that men were asked more “promotion” questions, highlighting potential gains and positive outcomes, while women were asked more “preventive” questions, underscoring potential losses and risk mitigation. Unsurprisingly, it was found that the ones who were asked promotional questions received six times more funding.
3 Ways to Overcome the Gap
The good news is that the gender gap is not a bottomless chasm that is too big to bridge. Several solutions can serve as building blocks for gender equity.
- Addressing Unconscious Biases
A good starting point for fixing issues like the disparity in the questions that male and female founders are asked would be to ensure that the same questions are asked to all entrepreneurs who are pitching regardless of their gender. If both sides were asked the same questions, it would remove a huge variable during pitch sessions and make the field more equitable.
In addition, there are evidence-based, data-proven ways in which unconscious biases can be addressed. These include overcoming denial, providing examples of how to change behavior, and encouraging empathy–which helps other people see any situation from a different perspective. By doing this, business leaders can see an issue from the vantage point of the affected person, and quickly identify ways in which they can act differently.
2. Combatting Outdated Gender Roles Among Decision Makers
Even in developed countries, outdated gender roles often dominate male thinking. For instance, fewer than 33% of UN member states have ever had a female leader, and in Iceland, the country with the narrowest gap, wage disparity is still over 10%.
A study conducted by Science Advances detected that the “lack of industry fit” factor is considerably affecting female founders. The research covered 392 ventures actively fundraising and 130 investors, and the findings revealed that female-founded companies that were aiming to enter industries that are predominantly male received less funding, and also, the deal came at a lower valuation. This was in comparison to other female founders who were fundraising for ventures in sectors perceived to be more female.
To combat this, there needs to be more emphasis in highlighting females in these sectors, crafting empowering messages that eliminates the public perception that some industries are only for men and others are mostly for women. This leads me to my next point.
3. Focusing on Female Founders and Investors
To solve one of the key problems of “women’s” business — raising capital — there must be more women creating investment funds to finance projects with female founders. European ones like Austria’s Fund F and France’s Sista Fund are putting a heavy focus on improving women’s representation in the startup community, committing considerable funding to women-led initiatives. Among other famous female-focused organizations are: XFactor Ventures, BBG Ventures, Female Founder Fund, Backstage Capital, Astia and Rethink Impact.
Additionally, the venture capital industry should promote initiatives like the Aurora Tech Award for female founders of IT startups whose projects have had the most profound impact on world development or programs like Virgin Startup’s 50/50 pledge, which led them to almost reach gender parity in 2022. If every fund followed this 50/50 rule, there would be no gap.
The Right Way to Close the Gender Gap Is Together
While efforts have been made, we still have much work to do to reach gender parity in VC. Former UN Secretary-General Ban Ki-moon notes that gender equality “is everyone’s responsibility,” and I wholeheartedly agree. Rather than taking an “us versus them” mentality, men and women should realize they’re on the same team — one whose focus is success and shared prosperity.
Last year, European startups raised €81 billion; just imagine how much more the community could do if men and women decided to combine their efforts and work with open minds to level the playing field. As our global community becomes ever more connected, Nobel Prize winner and former UN Secretary-General Kofi Annan sums up the importance of gender equality perfectly: “Gender equality is more than a goal in itself. It is a precondition for meeting the challenge of reducing poverty, promoting sustainable development, and building good governance.”
If we are able to empower more women to make their innovative ideas a reality, we can tap into an enormous pool of talent, one that can help us address the most pressing challenges and generate both economic and social value, creating prosperity for all and building a system in which high-potential projects and initiatives are rewarded and supported, regardless of who launches them.
