Female founders: A wise investment for the future

Female founders: A wise investment for the future

In male-dominated industries like tech and finance, or STEM in general, “gender gaps” and “gender biases” are still very present. Women are underrepresented and have a harder time establishing themselves in these industries. The problem is that gender-specific expectations and biases are still prevalent in our society. For example, women are often reduced to gender stereotypical positions such as design jobs, HR, assistants, marketing, etc. Unfortunately, there is not only a lack of women in science, finance or the tech industry but also a lack of female startup founders.

Startups are an important driver for the economic strength of a country. They bring creative ideas into our society, solve social problems, create jobs and generate growth even in uncertain and difficult times such as we are experiencing today. Unfortunately, here too there is a big problem: the gender gap.

The startup scene has some catching up to do

What the current startup scene lacks are female entrepreneurs. According to the latest figures from the Female Founders Monitor, women make up just under 16 per cent of entrepreneurs in Germany[1] and 20% in Switzerland[2]. Why is this number so low? Why aren’t more women founding companies? This question might be answered as follows: on one hand, women lack access to networks of investors and on the other hand, gender-specific biases apply, which make access to the world of venture capital even more difficult. Founding a startup is a demanding challenge for both genders but men benefit much more from their professional network than women. While there are now more business networks available for women than in the past, the lack of gender equality in certain industries still makes access to “relevant people” difficult.

Difficult access to venture capital and gender bias

In startup-relevant sectors, such as the investment sector, the representation of women is exceptionally low. This is reflected in the venture capital world. It is well known that venture capital is the fuel that enables startups to scale during their earliest stages, to internationalise and perhaps even to realise an IPO in the future. But as long as VC funds also suffer from gender inequalities, this issue will continue to contribute to the low number of female founders. Therefore, an important first step would be to bring more female fund managers into the VC world and invest in more diverse teams with their venture funds. According to a study by Harvard Business Review[3], VC firms that increased the number of female partners by 10% had a 1.5% increase in returns per year and 9.7% more profitable exits.

The gender gap of today’s startups is the gender gap of tomorrow’s big companies

Investors, press, associations and all other relevant actors in the startup ecosystem need to incentivise diverse teams. This is the only way the startup ecosystem can benefit in the long run. What is needed are stronger business networks for women, role models and mentors. It is also crucial that companies recognise the importance of diversity and the impact it has on their profitability. Institutional investors, as well as business angels, can take a step in that direction and broaden their investment criteria regarding diverse teams. It is well known that diverse teams achieve better results and that this in return has an impact on financial success[4]. So, my call is to “make the startup world an equal place!”. This is an investment in our economy, our future, and the future of generations to come.

Blog post by Eugenie Nicoud

[1] https://femalefoundersmonitor.de/

[2] https://www.swissinfo.ch/ger/startups_gruenderinnen-haben-es-schwer/46429036

[3] https://hbr.org/2018/07/the-other-diversity-dividend

[4] https://www.bcg.com/publications/2018/how-diverse-leadership-teams-boost-innovation