The startup scene is a thriving community of visionaries with bright ideas and of entrepreneurs who are keen to offer their support to these game-changing companies.
Look closely though and you will see an imbalance; most startup founders and angel investors tend to be men. We’re interested to know why this is.
This article delves into what barriers (if any) may be putting women off starting their own business, seeking out investment to fuel its growth or becoming angel investors themselves. We also look at what can be done to rectify this imbalance in some way.
What the startup scene looks like
The startup scene is more crowded than it was a decade ago. The numbers are quite staggering really. It’s estimated that globally there are approximately 305 million global startups.
However, looking at the demographics of startup founders it becomes obvious that not much has changed in the last decade. Startup founders still tend to male, white and educated. The average age of a successful startup founder is 45.
Taking data collated by Statista in 2018, we’re able to break down European startup ownership by gender. Overall males dominated the startup scene. For example, Poland had the highest percentage of female startup founders - 23.9% compared to 76.9% who were male. While Portugal had the lowest percentage of female startup founders - just 5.1%.
This gender imbalance also carries over into the funding scene. A report based on the study of 10,000 startups over five years found that only 9% of women-led startups received investment. A further report shows that the amount of venture capital that went to women-led startups topped over $3.54 billion. Sounds good right, but when you consider this is just 2.7% of all investment in the US. It shows there’s still work to be done to persuade investors that women-founded startups are worth investing in.
Why are women overlooked for investment?
There’s lots of noise in the startup scene for the support of women-led startups, but the figures we just mentioned show that this isn’t (yet) translating into action.
Studies have shown that one reason why women-founded or women-run startups are frequently overlooked for investment is down unconscious bias.
This is where an individual unconsciously favours others who are similar to themselves. We hear stories of this happening to women-lead teams who pitch for investment. During the pitch, they’re asked negatively-slanted questions like “Don’t you think the market is saturated enough?'' or ‘Have you thought about what you’ll do if you don’t break even?’. Whereas teams that are all male or majority male, are presented with positive-angled questions like ‘Where do you see the business in two years?’.
When you consider that angel investors are overwhelmingly male (quoted as being nearly 78% in the US), you understand why women startup founders or leaders are seen differently.
Investors themselves also admit to making assumptions of women startup founders. Such as, ‘their plan for the business only extends to starting a family’. There’s also the situation where investors aren’t convinced from the outset of the commitment of women founders, and send junior members of staff to the pitch, instead of attending themselves.
If change is to happen quickly, women need to take the lead. They shouldn’t be shy about promoting their successes and putting their ideas forward as the best. Whatever knock-backs come along (because there will be some), take it constructively and come back stronger.
Investors are missing out on prime investment opportunities
To put it plainly there are great gains to be made by investing in women-founded or women-led startups. The stats from Forbes speak for themselves:
- Private technology companies led by women achieve 35% more ROI than those led by men
- Startups founded and co-founded by women perform better overtime - generating 10% more in cumulative revenue over five years
- Women founded or led startups tend to be led by serial entrepreneurs who have the knowledge, skills and experience to quickly scale the business
- Women-led businesses achieve higher revenue than those founded by men - 2 x what is invested
The most astonishing thing to take from these stats is that all this is achieved by businesses who typically receive less investment. Just imagine what could be achieved if there was no gender imbalance?
We’ve mentioned what extraordinary things women-founded and led startups can achieve. Let’s look at a few examples and see what they’re doing:
We all know how important it is to put the planet first. Unfortunately, the fashion industry has a reputation for producing a lot of waste and for not treating its workers fairly. There are clothing brands out there who are working to change this but finding ethical clothing isn’t always easy. Project CeCe brings together over 100 ethical fashion stores and over 200 fair trade brands, so you don’t have to scour the internet for ethical clothing.
Project Cece was founded in 2016 by sisters Melissa and Marcella Wijngaarden and their friend Noor Veenhoven who met while studying in Amsterdam. Today, the team is majority female and Pitchdrive has recently helped them raise their funding.
Click the button below for more information regarding Pitchdrive funding!
Leavy is described as a community and marketplace that helps millennials travel for less money. Travellers (known as Happy Leavers) can rent out their room or apartment when they are away themselves. The Leavy app is a way of generating money from a vacant space. It differs from other apps, in that the members are paid upfront when they make their space available prior to travelling, regardless if a booking is made or not.
Leavy was founded in 2017 by then student Aziza Chaouachi. It scaled very quickly and now employs around 117 people. Late in 2019 it quietly raised €14 million in funding.
The other side to the story - where are the women angel investors?
As well as being a minority as startup founders and leaders, there’s an obvious lack of women angel investors too. Figures show that women make up only 14% of the angel community in the UK, 9% in Spain and 5% in France.
The startup scene needs more women angel investors as this creates positive momentum for female startup founders. But we need to understand what is holding women back from investing.
A lack of women role models is one reason put forward by Jenny Tooth, chief executive of the UK Business Angels Association. Successful women angel investors do exist, like Kinga Stanislawska, general partner and cofounder of Experior Venture Fund, or Elina Halatcheva, co founder and managing partner at BrightCap Ventures. There’s a need though to create an environment that celebrates women angel investors.
The psychology of women may also play a factor. Women tend to be more cautious while men edge on being risk-takers. A lot of confidence is needed to be an angel investor, as it’s riskier than other more heavily regulated investments. Access to more and better information is needed either through networking events or peer groups. More success stories will also encourage more women to invest.
Another reason that could be holding women back from investing is conscious and unconscious bias. Women report that they’ve felt patronised or looked down on.
It may seem like an uphill battle for women angel investors, but things are changing. More women are starting to invest in startups and backing women-founded or led startups as well. But more can and should be done.
Bringing people together is key
Growing a fledgeling startup can at times seem like a battle you’re trying to win on your own. You’re working against forever changing economic conditions. Plus, with it taking longer to hire talented people to grow your team and a lack of capital restricting your growth - being a startup founder can be a headache.
You don’t have to face these challenges on your own. Join Pitchdrive and you’ll benefit from access to a free startup (e)valuation that details where your startup is and what you can do to hasten its growth. Depending on which Pitchdrive plan you go for you’ll be able to connect with a community of passionate, experienced and knowledgeable startup founders and investors. And, have access to our funding programme and the best SaaS tools like Hubspot, Segment and Stripe.
Check out the different Pitchdrive Plans and select the one that suits your startup.
Do you fancy becoming an angel investor but aren’t sure where to start? Then you’ll find this FREE event - Women Investing in Tech - being held by Baltic Sandbox interesting. It starts on 10 November and runs for five weeks. The programme covers several frameworks, including how to evaluate a startup, which key metrics to look for and how to build and maintain investor-startup relations.