It's been a fantastic year for European tech, with nearly $35 billion invested in companies founded in Europe. But there's a caveat: women's share of funding has been weaker over the past four years.
A report published by London -based VC firm Atomico describes a bleak trend for female entrepreneurs. In 2015, 11% of investments in Europe went to mixed-gender, all-female teams. This year, that figure has fallen to 8.4%.
In other words, for every $100 invested in Europe in 2019, $92 went to funding teams that were all male.
One explanation put forward by the report is that the largest investment rounds always go to male founders, which erodes the overall share of capital raised by more gender-diverse teams. No investment deals worth $100 million or more have been signed with a women-led team in the past four years, and only 7% of those deals went to mixed teams in 2019.
Sarah Nöckel, an investment partner at VC firm Dawn Capital, told ZDNet: “Europe is lagging behind in diversity, in general, there is still an unconscious bias against women, more education is needed to change mindsets.”.
The issue isn’t that women are absent from the tech space. Of the 1,200 European tech founders surveyed, nearly a quarter identified as women.
The report also found that women and men are almost equally skilled in science and engineering careers. In fact, in some countries, such as Lithuania, the number of women who are scientists and engineers exceeds that of men.
Women can and do found tech, so the problem is that they then struggle to secure enough capital to develop their projects.
“The women are there. It’s not that VCs are struggling to find them,” said Nöckel. “The main problem, rather, is access. The business is a tight circle of people that hasn’t changed in years, and if you’re outside that circle, it’s hard to get past the first hurdle.”
And when we look at the investment teams that end up making the funding decision, the trend crystallizes: the report effectively shows that a striking gender imbalance remains within the VC industry.
While the share of female investors in junior positions has increased this year to 37%, it remains that women in senior positions, who are more likely to make key investment decisions, represent only 13% of European investors.
“Increasing diversity in VC funds is an important part of encouraging more founders,” said Sophia Bendz, a partner at Atomico. “If investors are more representative of the diversity of society, we will end up with a more diverse set of entrepreneurs.”.
It's not just gender diversity that needs to be addressed: the report also noted that 84% of founders describe themselves as white and 82% as university-educated.
However, European VCs are divided on whether the industry is strong enough to diversify its ranks. The report also says that the issue of diversity caused the greatest level of divergence of opinion among VC respondents. Around a third of them agreed that the industry has taken significant steps to improve the diversity of the founders they support – a quarter disagreed, and the remaining respondents neither agreed nor disagreed.
Additionally, VCs are not all taking the same steps to improve gender representation. While the vast majority of female VC respondents said they are increasingly focused on attending events with diverse founders, this was only the case for 36% of male respondents.
Ekaterina Gianelli, a partner at VC firm Inventure, told ZDNet that the VC space, despite having been discussing the issue for “a long time,” is still not taking clear action. “However, actions count,” she said. “Daily behaviors on our team, promotions we make, startups we back.”
For Gianelli, the underrepresentation of women slows down the entire tech ecosystem. That’s why she constantly studies team composition when she invests. If a team isn’t diverse from the start, she said, it’s almost impossible to fix later.
However, diversity is not yet the focus of every VC: according to Nöckel, inclusion is still not the norm, despite being a hot topic. “We need to start thinking about it as a fundamental problem so that we can remove the barrier between investor and founder,” she said.
Nöckel is positive that change is happening, albeit at a very slow pace. She stressed that such change cannot happen overnight, and gave “about 10 years” before any significant change is achieved.
The report identified 28 initiatives in the UKthat are working to achieve more diversity and inclusion in the tech industry. They include meetups, events, consultancy services, co-working and even coding schools.
