Five Takeaways: 2023 VC Factor Gender Lens

Insights garnered from data can lead to a better understanding of today’s VC industry and how firms can identify opportunities to strengthen women’s voices, resulting in a more balanced ecosystem for an even stronger European economy and society in the future.

Are you a European VC fund manager or part of a startup team? If so, then take a look around you the next time you’re in a team meeting or analysing your portfolio. How many women do you see? The numbers might surprise you. For startups, it’s a meagre 12%, and venture capitalists don’t fare much better at roughly 23%. As the saying goes, the hardest thing to see is often right in front of your eyes.

By any measure, women are still significantly under-represented amongst venture-backed entrepreneurs and VC investors, as the European startup space and VC ecosystem both remain dominated by men. The good news, however, is that there are signs of positive changes, which will surely continue to gain momentum in the months and years ahead.

VC Factor 2023: EIF, Invest Europe and PitchBook Join Forces

These are among the insights from the EIF’s 2023 VC Factor report, which is our series of large-scale, data deep dives on VC investors and startups located in Europe. Regular readers or followers of our activities will remember 2019’s “Pandemic edition,” and we’ve taken a similar thematic-based approach this year with our gender lens.

Produced with our colleagues at Invest Europe and via a data collaboration with PitchBook, the report maps European venture capital in unparalleled detail, identifying the innovation hubs, as well as the links between venture capital firms, investors and start-ups across the continent.

Nearly 39,000 unique investors and over 85,000 entrepreneurs active in Europe from 2011 to 2021 were analysed, although this represents a fraction of the total workforce in the European VC ecosystem. Anyone interested in European VC should take a look at the entire report. But for those in need of bite-sized insights on the gender angle, we’ve put together the following five key takeaways (in no particular order).

The Spanish and Portuguese Do It Better than DACH and Benelux

Looking at the European VC ecosystem through a gender lens necessarily reveals a complex landscape of gender diversity across different stages, industries, age groups, and regions. The Iberian Peninsula, for example, is the most gender diverse region, whilst DACH and Benelux lag behind.

According to the report, Spain and Portugal are at the front of the pack with an overall proportion of all-female start-up teams of approximately 14%, unlike counterparts in Austria, Germany, Switzerland, Belgium, the Netherlands and Luxembourg — countries with the lowest female participation rates and the highest share of all-male entrepreneurial teams.

“It’s always about networking: women always had a disadvantage because they have less senior roles, they’re also less present where things are happening, where things are being decided, with opportunities that are being presented, so I think we also have a gap to fill in access to networks, from a start up perspective but also from a fund manager’s perspective.”

Tamara Obradov, Fund Manager at Tablomonto Ventures, Netherlands

When it comes to VC firms, the Iberian Peninsula excels once again with a leading 17% gender diversity rate. In contrast, VC firms in the DACH region and CEE lag behind with 11.8% and 11.2%, respectively, while all other regions maintain a gender ratio well above 13%.

It Turns Out That Gender Diversity Is a Generational Thing

Out with the old and in with the new? Not entirely. However, gender imbalance is a historical problem, which is to say that it is a generational one, but the European VC ecosystem has seen a gradual shift in gender diversity over the past decade (the pace of change, though, will surely be unsatisfactory to many).

The “age” of the start-up or VC firm (i.e., the years to date since the organisation was established) plays a role in gender diversity. According to the findings of the report, startups that have been recently incorporated tend to be more gender diverse: the female participation rate for start-ups incorporated five or less years ago is 12%, versus the 7.7% of those incorporated more than 10 years ago, possibly due to recent improvements in female participation rates on the startup side.

When we think about the age of VC firms, we see that recently established ones also tend to be more gender diverse, having more all-female and gender-balanced teams. However, it should be noted that the difference in female participation is slight: 13.6% in firms over 25 years old compared to 15.5% in those five years or younger.

Whilst younger firms might be more aware of gender imbalances from the outset, their older counterparts have heeded the call to diversity and inclusion by recruiting more women into top-level roles over the years. Who says that you can’t teach an old dog (or male-dominated VC firm) new tricks?

Networks Matter: It’s What She Knows but also Who She Doesn’t

In order to get your foot in the door, it still helps to know someone on the other side of it who will answer when you knock. And with comparatively few women in the room, aspiring women entrepreneurs and VC managers continue to have difficulty breaking through the glass ceiling (we know — we’re mixing our metaphors).

As the report ascended the corporate ladder, it found that women occupy a significantly smaller proportion of top-level positions in both VC firms and start-ups. In VC firms, the gender diversity varies noticeably by rank, with a share of women just over 14% in top-level roles (e.g., partners, managing directors). Slightly better were mid-level positions (e.g., investors, directors), with nearly 29% female participation rate. Low-level positions (e.g., analyst, associate) show the highest female representation, just below 35%.

And the startup landscape is a similar one. When considering founders or CEOs, women occupy just over 10% of such roles. Board member positions are held by women in just over 14% of cases. Female Chief officers are around 17% out of all Chief officer roles in the data.

Interestingly, top-level investors in VC firms, founders and/or CEOs in start-ups — the key movers and shakers in the space — have closer female participation rates than in other role ranks.

Addressing the gender gap will necessarily entail a holistic approach, and, as the above findings demonstrate, a key piece of the policy intervention puzzle will be initiatives to promote the inclusion of women throughout their careers, especially during the early stages.

Gender Disparities and the East-West Divide

When considering start-ups, Eastern Europe takes the lead in gender diversity. Bratislava stands out with a female participation rate of over 17%, making it the most gender-diverse start-up hub in Europe. Vilnius follows closely with a gender ratio of 16.3%. Dublin claims the third spot with a gender ratio of approximately 16.2%, while Budapest and Bucharest, with gender ratios of 16.2% and 15.8%, respectively, round out the top five.

“The gender balance at investor level brings, apart from different perspectives and ways of doing business, a more balanced risk profile of investments […]. Moreover, it would reduce the biases in stereotyping women-led start-ups, that would have a cascading positive effect in the start-up ecosystem.”

Simona Gemenau, Partner at MorphosisMorphosis Capital, Romania

Western European hubs like Milan, Geneva, and Lisbon also make a strong showing, although none of the four German hubs make it into the top ten. Paris, one of the most prominent VC hubs in Europe in terms of deals, comes in at spot number 18.

Turning our attention to VC firms, Lisbon leads the way with a gender ratio of approximately 19.4%. Sofia, Stockholm, and Vienna follow, with gender ratios of about 18%, 17.2%, and just below 16.7%, respectively. Interestingly, aside from the Bulgarian capital, eastern European hubs are largely absent from the top ten in this category. And once again, none of the four German hubs make it into the top ten, while Paris ranks 11th.

Crucially, these findings underscore the fact that gender diversity in the European VC ecosystem is not necessarily a West or East phenomenon, but rather an emergent property of hubs that varies greatly by latitude and longitude.

The Gender Diversity Numbers Aren’t Especially Good (but They Are Improving)

From 2011 to 2021, only one in ten founders and CEOs who received VC in Europe were women. All-female start-up teams were the other unicorns of the ecosystem, securing a mere 2% of the total VC funding. On the investor front, while one in seven top-level VC investors in Europe were women, the vast majority worked in male-dominated teams (nine out of ten).

This gender imbalance isn’t just a reflection of the European high-tech industry being a historically male-dominated one. In fact, data from Eurostat suggests that the VC ecosystem is less inclusive than its constituent industries, pointing at specific barriers that hinder women’s participation in VC.

All-male start-up teams, which make up 78% of total founders and CEOs, received an outsized 82% of total investments. In contrast, all-female start-up teams garnered under 1.8% of total investments, even below the 2.1% they make up in terms of total founders and CEOs.

All-female entrepreneurial teams represent 3% of total investments below EUR 1m, but only 0.88% of investments above EUR 10m, in large part due to networks. If we consider top-level job titles, 25% of European VC flows involve no women on either side of the table. In other words, one quarter of VC deals were from all-male top-level investors to all-male founders and CEOs. The percentage of European VC volumes involving no men at the top is a paltry 0.003%!

“Policy makers should help create those first success stories, which will then inspire the next ones to believe in what they do and make it as well. Public investors should play the role of the female LPs that we severely lack.”

Thaleia Misailidou, Angel Investor, Greece

This might all sound dispiriting, but there are reasons for optimism. Steady progress is being made as the European VC ecosystem continues to increase its female participation rate, particularly at the top. And the increasing number of hubs with notable gender diversity rates serve as key success stories, which will surely inspire other hubs to level the playing field (remember what we said about EU VC hubs being interdependent?).

Parting Thoughts: The European VC Ecosystem Remains Remarkably Resilient

Despite a seemingly unprecedented convergence of political, ecological and economic factors, to say nothing of the aforementioned gender disparities, Europe’s VC ecosystem continues to demonstrate its resiliency, particularly when viewed against the backdrop of the recent pandemic-driven economic crisis. As our Chief Executive, Marjut Falkstedt, and Head of EIF’s Research & Market Analysis and Chief Economist, Helmut Krämer-Eis, write in their foreword to the report,

“Over a third of VC volumes from the past decade were invested in the 2021–2022 biennium alone, with 2022 posting another impressive industry high. Today, the ecosystem appears more capable than ever to stand on its own against potential market instabilities, a desirable trait when entering the so-called ‘age of the polycrisis.’ In turn, this further reinforces the industry’s positioning at the forefront of change, poised to offer innovative and sustainable solutions for Europe’s present and future challenges.”

Such connections are at the heart of a cohesive and dynamic ecosystem, one that is fostering bright ideas in cities and towns throughout Europe, helping more and more startups to flourish, and spreading the benefits of venture capital investment within and beyond Europe.