Female entrepreneurship when 8.5 out of 10 startups are founded by men

lisa_neuLisa Schreier has been Head of Research & International Strategy at the German Startup Association since April 2014, where she is responsible for the German and European Startup Monitor. She is also co-founder & CEO of the European Startup Network, which she set up jointly with Karen Boers from Startups.be. Before working with startups, she worked in consulting with the department for Inter-Parliamentary Conferences of the Bundestag in Germany, the commercial department of the International Chamber of Commerce in New York, and the American Consulate in Munich.

The first study on the European Startup ecosystem, the European Startup Monitor (2016), reported that, on average, 14.7% of startups in Europe were founded by female entrepreneurs. This means that over 85% of startups in Europe are founded by men. Although, some countries like Sweden (33.3%) and France (26.7%) paint a more positive picture, this number means that there is an urgent need to promote gender equality in entrepreneurship.

EU monitor report

There is no clear explanation why founding a business is predominantly a male domain. One finding is that there has not been enough academic research on this topic, in addition to various soft factors, such as cultural influences, which make it difficult to resolve this mainly societal puzzle. When attempting to find answers to the “why”, three main areas should be taken into consideration: family, financing and sanity.

Firstly, when looking at the major startup hub – Germany, the German Startup Monitor (2015) found that 80.9% of startup founders – both male and female – completed tertiary education. It also found that the average female founder is 31.1 years old when founding her first business. Looking at demographic statistics, women with tertiary education on average give birth at 31 years of age. Since the average age of founding a business correlates with the average age of giving birth, this raises a question as to whether women are tending to choose family over entrepreneurship.

Secondly, studies have shown that attracting investors is more difficult for female founders since only 10% of startups that raised Series A rounds had female founders. Unfortunately, there are not yet any comparable studies on gender and venture capital in Europe. But the trend is alarming: 85% of all venture capital–funded businesses have no women on their executive teams. What’s more, only 2.7% of venture capital-funded companies have a female CEO. Looking at the venture capital firms themselves, female partners make up only 6% – therefore 94% of decision-makers at venture capital funds are male.

The third, and perhaps most surprising reason that is often discussed relates to the characteristics of founders. When starting and promoting a business under high-risk conditions, where there is massive uncertainty, founders cannot justify their decision with rational facts that have been carefully analysed. Successful founders are characterised by their decisiveness, resilience, and confidence. Not enough female founders are being put forward as role models for entrepreneurship, so these leadership traits are predominantly identified as masculine. Many females may decide not to found a business due to the high risk and uncertainty associated with this type of investment.

The upside is that, within current developments, there has been a change in perception of mixed founding teams. Research has proven that having a woman on the founding team has positive effects. First of all, when venture-backed, women-led tech startups bring in 12% more revenue than male-owned tech companies and achieve a 35% higher return on investment. Mixed teams have further proven to be the most efficient, since team members generally tend to be more focused on problem solving when gender is not an influential factor on the team.

So what do we have to change? We have to establish an education system that teaches about entrepreneurship and digital skills at an early age, as well as encouraging all genders to believe in themselves. All genders should be encouraged to be courageous enough to follow an idea without constantly worrying about failure. Embracing the possibility of failure should not only be taught in school but must be embedded in European culture. If society starts to accept out of the box thinking in both males and females while providing a network of mentors instead of critics, we may be surprised to see where the European Startup ecosystem may go in the future.

Tags: , , , ,