Founders and operators

Last year, more than a third of founders said fundraising had become easier compared to the year before - less than 20% said it was more difficult. Unsurprisingly, this year changed that trend - with nearly 80% of all founders saying it's now harder to raise funds.

It is worth noting though, that ethnically underrepresented founders (as self-identified in the survey), already found last year's fundraising environment more challenging than white men by a full 12 percentage points. The new reality isn't that new for underrepresented founders, who typically face heightened barriers in this sector. We will explore the state of diversity and inclusion in more detail in its dedicated sub-chapter.

Overall, the vast majority of founders have come to acknowledge the new market reality: while it wasn't easy to begin with, fundraising has become a lot harder than it was 12 months ago.

The founders who raised funds in 2020 and 2021 are most likely to see a shift in the market - with 86% reporting that it is harder to raise capital today than when they did.

In this new context, the most common adjustments founders and C-Level executives have made are to their valuation expectations, the length of the fundraising process, and round sizes.

The overwhelming majority of these survey respondents see the changes as unfavourable. In other words, they achieved lower valuations than expected, it took longer than planned to raise, and they raised less than they hoped. Less than 20% of respondents bucked this trend, and had more favourable experiences.

If we zoom in on founders' expectations on valuations, we find that these are prone to change regardless of the broader market environment.

It is by far the most cited negative adjustment founders who raised this year say they've made to their fundraising process, with 82% of them saying that their valuation expectation was effectively revised down. However, this is not particular of those who raised this year. In fact, those who report last raising across the years 2019 - 2020 are saying the same. So, resetting expectations on valuations is nothing new, and the price discovery process is a necessary evil when founders go to market.

Other changes made seem more reactionary to the market shift. For example, more founders who raised in 2022 compared to earlier years report having to make "unfavourable" change to their fundraising timeline which undoubtedly mean stretching it longer.

In bullish funding environments, companies are able to see their valuation grow higher, faster.

Below, we explore this growth by looking at the average step-up in valuation between funding rounds, as measured by the change between the pre-money valuation of the current round and the post-money valuation of the prior round. For example, if the valuation of a company doubles between rounds, it is reflected as a 2x valuation step-up.

After what was already a long upwards run, valuation increases spiked materially during last year's booming market conditions, reaching an all-time high of 1.7x for the median company. For companies in the top quartile, the spike was even more pronounced. The valuation increase at the 75th percentile reached 2.9x in 2021.

As the market has cooled, a reverse trend is already appearing. Both at the median and 75th percentiles, the average jump in valuations between rounds has stopped increasing.

Looking more closely, Seed stage companies pre-money valuations have continued to grow at median in the most recent quarter, while all other stages have experienced a slowdown. While the bottom decile and quartile at Seed are showing first signs of a valuation recalibration this quarter, the other stages got hit earlier. Series A and B valuations took a step down in the second quarter of the year, while pre-money valuations at Series C peaked already in the final quarter of 2021.

Another feature of a buoyant market environment, characterised by high levels of capital supply and positive investor sentiment, is a tendency for companies to be able to raise additional funding without taking a down round.

Unsurprisingly, there has been a steady decline in the share of down rounds over the past years. 2022 has, interestingly, seen this trend continue. In a year of transition, a certain lag in down rounds is to be expected. This is because many companies that might expect a down round if they were to raise new external capital in the immediate term simply choose to put that moment off until it's an absolute necessity. The market should expect the downward trend of down rounds to reverse across the board, as more companies are 'forced' to come back to the market to raise.

The length of time between funding rounds tends to compress when markets are hotter. Recent years have seen the average time between funding rounds trend shorter as companies proved able to raise new rounds at an increasing cadence. In fact, in Q1 2022, the average time fell to a record low across both early and late stage companies, at 14 and 23 months respectively.

It's always interesting to separate the market average from what is happening with the companies at the extreme ends of the scale. Looking at the 10% who raised fastest ('the fastest decile'), in Q1 2022, the average time between rounds fell to 4 months for early stage companies, and just below 7 months for late stage companies.

We can expect this trend to shift in the other direction in the coming year. There are already signs from June 2022 onwards that the average time between rounds is elongating again, hitting companies raising the slowest most significantly ('slowest decile'). At the early stages, it now takes 6 months more for those companies to raise their next round, compared to 2 months more for those raising the fastest. For later stage companies the disparity is even more significant: an increase of more than 6 months for the slowest, compared to just 1 month for the fastest companies.

Prudent cash flow management becomes more important when the market shifts from relative capital abundance to scarcity. It's not surprising then, that almost half of the founders we surveyed plan to decrease burn rate over the next 12 months to extend their cash runway. This has, unsurprisingly, led to a wave of layoffs across the industry - data we explore later in this chapter in "Talent market conditions".

While some founders have sought to avoid fundraising in an uncertain and volatile market, many will need to go back to market over the next 12 months to raise further equity or debt financing. More than a third of founders (35%) expect to increase cash by raising additional equity financing, and 13% expect to raise debt financing.

Almost one in five founders expect to accelerate investment over the next 12 months, perhaps indicative of the fact that some founders, especially those with the luxury of strong balance sheets, will see the turbulent market conditions as an opportunity.

The median size of funding rounds has recalibrated swiftly, though the picture differs by stage, with Seed stage rounds so far insulated from the sharp declines seen at Series A and later stages.

At Seed stage, round sizes continued a multi-year growth trend, hitting the highest-ever levels recorded in Q2 2022, both at the median and at the 75th percentile. In Q3, the median round size remained steady, while the top quartile saw a slight decline.

At Series A, round sizes increased rapidly during the pandemic years, and are now showing signs of having passed a peak in H1 2022. The median Series A hit a peak of $11.4m in Q1 this year, while rounds in the top quartile appear to have peaked at just over $20M in Q2.

At Series B and Series C, the observable trends in round size evolution are similar, following a story of rapid growth during 2020 and 2021, followed by a rapid and material decline at both the median and 75th percentile in 2022.

We asked founders which factors they believe will positively and negatively influence their ability to raise capital during the next 12 months.

Across all company stages, founders most often cite their growth rate and financial metrics as the factors likely to have a negative impact. Cash burn and capital efficiency are also frequent answers. The more late-stage the business, the more likely the founder is to be concerned about hitting key milestones, with 16% of Series C founders saying their ability to do so could negatively influence their next raise, compared to just 9% of Series B founders.

As for the factors that can have a positive impact, progress against key milestones is the most cited across the board. For founders of early-stage companies (Series A and earlier), business growth rate is the second most important factor, while for founders of Series B and Series C companies, operational metrics, unit economics, and sales efficiency are all commonly cited.

We asked founders to share the biggest commercial, operational and financial challenges their companies have faced in the past 12 months (challenges related to talent were excluded, and covered separately). Responses varied significantly depending on the stage of their company, reflecting the unique challenges presented at each phase in a company's evolution.

Founders in the earliest stages of building their companies are most likely to be grappling with product-market fit and securing access to capital. Finding product-market fit is a less prominent challenge among founders at later stages though, notably, almost a third of founders still mention it even at Series A and Series B.

Commercial traction, or growth, is a challenge that spans all company stages, as demonstrated by the share of founders across the board who cite 'securing new customers' and 'building repeatable sales processes'.

The challenges most correlated to company stage are managing burn rate and existing customer churn, increasing in prevalence at each new funding round. In short, as companies mature, the onus falls on delivering consistent and sustainable growth that can balance growth and capital efficiency.

Regulatory requirements also capture a share of concern for founders – in particular for those that have scaled past Series C, where the policy landscape becomes more important.

Looking ahead to the next 12 months, we asked founders to anticipate the biggest challenges they'll face. Comparing these against the challenges they reported experience in the past year, we can draw out the specific challenges founders expect to become tougher in 2023.

The graphs below show the percentage point difference in how often the various answers were given when looking at the past 12 months compared to the coming 12 months, to help better spot the trends across stages. The taller the bar in the graph, the bigger the increase in importance looking forward, as suggested by founders' answers. If the metric is negative, it implies that the measure was more important in the past and has lost significance in priority looking forward to the next 12 months.

Going into the next 12 months, securing access to capital is the top concern for all founders, with the exception of those at Series C and beyond. While this was already challenging in the past year, the expectation is that this will get even more so as the spread widens across Pre-Seed, Seed, and Series A, with 3, 10, and 7 percentage point increases respectively.

Founders of companies at Series B stage expect their biggest challenge to be securing new customers - with this response increasing by 13 percentage points when looking to the future versus the past year. This stands in contrast to all other stages, where concern about this issue hasn't particularly increased.

Meanwhile, Series C founders are much more focused on managing their company's burn rate and customer churn, reflecting the expected impact of the macroeconomic environment. As such securing new customers takes a backseat by a margin of 13% percentage point.

Despite the change in the macro environment, founders and leadership teams don't see the war for talent ending any time soon. Talent remains a top challenge both as they reflect back on the year past, and look ahead to the next 12 months. It's also telling that in the past 12 months managing a remote team has matched - and nearly dethroned - hiring as the top people & culture challenge for founders and leaders.

Looking ahead, founders are focused on growth, especially hiring rapidly and retaining current talent. This is a promising indication of founders' determination and expectations for 2023: they are not sitting back, but rather charging forward, and looking for the people to help them do this.

When considering their company's talent and culture, Pre-Seed founders report increasing concern around rapidly growing their team (14 percentage points more cited as a challenge for the coming year compared to the past 12 months), and attracting diverse talent (12 percentage points more).

Unsurprisingly, managing a remote team is predicted to decrease in importance, with Pre-Seed founders 9 percentage points less likely to cite it as a concern for the coming year, compared to the past. Perhaps these founders feel they have hit a rhythm with their remote team members, or are returning to in-office working. In fact, early stage founders across the board seem to have worked out some kinks in this area, with a 9 percentage point decrease in this challenge at Seed level and a five percentage point decrease at Series A, when looking from the past 12 months to next.

The challenge that is gaining most importance for Seed and Series A founders is retaining talent, which is cited 17 percentage points and 16 percentage points more respectively, when looking to the coming year compared to the past. Hiring maintains a predictable lead as Seed Stage's biggest people & culture challenge in the next 12 months. Meanwhile at Series A, leadership and management development takes first place in the minds of founders, while hiring concerns drop steeply (11 percentage points).

Looking back at the biggest challenges of the past year, Series B founders report 'maintaining team morale' and 'rapidly growing the team' in equal measure. Looking to the coming year however, most of them are less concerned about these, and other, people and culture issues.

Similarly, founders at Series C stage are also much less concerned (30 percentage points) about 'rapidly growing the team' when looking ahead, compared to what they experienced over the past months. Instead, these founders are increasingly focussed on maintaining team morale, and retaining talent. This could be an indication that they are 'buckling down' for leaner times.

Despite the challenges ahead, and regardless of the stage of their company, founders we surveyed maintain or have increased their confidence in Europe's ability to build global technology leaders. In fact, 45% of all founders say they have more confidence today than they did 12 months ago.

Looking at this data, one interesting trend pertains to the career stage at which today's newest founders embark on their entrepreneurial journey. In absolute terms, the number of founders with more than 20 years of experience prior to starting their most recent company has remained remarkably stable across the past two years. However, their share of the founder pool has declined, as an increasing volume of less experienced talent is embarking on the entrepreneurship path.

In the first quarter of 2020, only 27% of new founders had less than 10 years experience, as tracked by Specter. By Q3 2022, these less experienced founders made up 50% of the new founder cohort. This growth speaks to an increased pull towards entrepreneurship among talent, and could also be tied to the 'great resignation' trend seen in the pandemic years.

Of course, the flip side of this inflow of new talent is that many founders today have only experienced entrepreneurship during an extended period of bull market conditions. These founders are set to be tested by their first experience of a downturn. This section of the report explores the profile and experiences of those building tech companies - and securing funding - in 2022.

The trend of younger founders starting companies is visible throughout Europe. Across all countries and regions, the share of new founders with less than 10 years of experience has risen significantly quarter on quarter since the beginning of 2020. The trend is most notable in France, where the share of founders that started companies with less than 10 years' prior work experience hit 63% in Q3 2022 - the highest level of any European country. This compares to 53% in the UK, and 41% in the Netherlands.

In absolute terms, the total number of new entrepreneurs tracked by Specter has also continued to rise across the continent.

The pull of the entrepreneurial ecosystem in France is evidenced not just by young founder cohorts, but by the rising interest in tech jobs. Looking at the share of job searches focussed on tech, France has seen the strongest growth year-on-year out of any European country, according to Indeed's dataset. France is followed by Sweden, Germany and the UK, respectively.

While most countries have seen a relative increase in searches for tech jobs, there are also notable declines in some countries, including as Portugal and Italy.

We have once again collaborated with Dealroom to better understand the profiles of the founders and leaders behind European tech. To produce this snapshot, we analysed more than 100,000 unique 'work experiences' from a sample of over 20,000 unique individuals at European tech companies that received investment during 2022.

To enable analysis of the dataset, each profile is labelled based on a number of different factors. For example, founders and leaders are labelled 'multi-generational' if they have worked at multiple tech companies founded during different time periods in the tech ecosystem. This is an interesting proxy for how knowledge and know-how flows from one generation of companies to the next through talent recycling, redistribution and connectivity. Profiles are also labelled to indicate whether they have prior experience at a European unicorn company, indicating exposure to outlier companies that have scaled to meaningful levels.

The list below provides deeper insights into the methodology and terms referred to throughout this analysis, which seeks to uncover new insights into the European tech talent pool: its depth and breadth, its readiness to face the market downturn, and its ability to build in a bear market.

Country-level data is only included where the sample size is statistically significant.

The data analysed below is based on a subset of founders and leaders of companies that raised raising a minimum of $500k in 2022, and for whom we were able to gather a complete set of experiences. This encompasses a broad range of companies, from newly founded start-ups to more mature scale-ups. For reference, 66% of the companies included in the sample have raised $10M or less overall, 22% have raised between $10-50M, and 12% have raised $50M or more.

Companies today lean on experience from different time periods of European tech: 55% of founders and 59% of leaders whose profiles we analysed have multi-generational experience, meaning they have gained experience at two or more tech companies belonging to different generations. Generation is defined here by the founding year cohort to which the companies belong.

22% of founders and leaders in our sample also have experience working at $1B+ companies. Among the 4% of founders with that experience, they have combined exposure to over 200 unique $1B+ companies. For leaders, the recycling is even more visible with 31% having worked for a $1B+ company, across more than 300 unique companies. This is to be expected given only a small subset of leaders go on to found their own company, instead of continuing leadership roles.

It's striking that almost 40% of founders have prior experience founding a company, and close to one in five have founded at least two companies prior to their current one. Many within the leadership pool at the top of European tech companies also have their own entrepreneurial experience, with 14% having founded at least one company in the past.

International work experience is common throughout: one-third of all the founders and 45% of all C-Level leaders in the sample have worked abroad at some point in their careers.

How is experience distributed across the founders and C-Level leaders of Europe's startups and scaleups? 

Looking first at founders, the vast majority (67%) have more than 10 years of total work experience. Just 4% of founders have started their companies within five years of embarking on their professional careers. As for time spent specifically in a founder capacity, close to 30% have more than 10 years experience in a founder role, while 36% have between five and 10 years.

For C-Level leaders the distribution leans slightly less experienced, with 25% having held leadership positions for more than 10 years, and 52% having less than ten years of total career experience. 

Overall, Europe benefits from a strong base, equipped with a range of prior leadership experience.

While today's founder cohorts have a higher proportion of young founders, the greatest share of capital investment is still concentrated among the founders with the longest experience.

Below, we explore experience as measured by time spent in a founder capacity (“work experience in founder positions”), as well as measured by their total career experience in all operating capacities (“work experience”). We then look at how capital investment in 2022 was distributed amongst different cohorts of founders, segmented by their experience levels. The overwhelming share of capital (86%) flowed to founders with more than 10 years of career experience. Almost half of the total investment (45%) was allocated to founders that have more than 10 years of experience in founder positions. As companies mature and raise further capital, naturally capital skews with more experienced founders.

Across European markets, there are interesting differences in the distribution of founders by years of cumulative experience in the role. France and Germany, for example, have a greater share of founders with less than five years of cumulative experience in the founder role. This could reflect the increasing attraction of entrepreneurship in the eyes of young talent, as the growing strength and maturity of their local ecosystem leads to better opportunities.

The companies that scale fast and are able to raise large rounds are, predictably, likely to be run by more experienced founders.

While founders with more than 15 years of total work experience account for only 19% of the sample we analysed, they accounted for 51% of all the $100M+ rounds raised in 2022: a multiplier of 2.7x. In fact, the vast majority (88%) of those who raised these large rounds have more than 10 years of total work experience, and 51% have at least 10 years experience in a founder position. 

By contrast, in our sample, not one of the founders with less than five years experience raised a $100M+ round. This is natural, as most companies led by relatively 'new' founders have not yet reached the stage where they might raise a round of this magnitude.

Facing a challenging year in tech, we wanted to explore the extent to which today's founding and leadership teams have prior experience operating during downturns. To do so, we looked at how many companies in the sample have founders or leaders with more than 15 years of work experience - and therefore experience from a previous downcycle period in tech.

In our sample, we found that 62% of all companies have at least one founder or C-Level leader with prior downcycle experience. As is to be expected, companies that have raised more capital (>$100M in total), and are therefore more mature, are also more likely (78%) to have founders or leaders with prior downcycle experience. Earlier-stage companies, which we defined in this analysis as having raised less than <$10M total, are less likely to have this downcycle experience (57%). That said, the pandemic already put many of these founders to the test, and prepared them for dealing with uncertainty.

If founders who have prior experience at a unicorn company are more likely to go on to help build another unicorn, the current distribution of those companies should act as a strong indicator for where success will compound over the coming years. To test this hypothesis, we compared each country's share of European unicorn companies, to their share of talent with unicorn experience.

Broadly-speaking, countries that have produced higher numbers of unicorn companies are also home to higher proportions of founders and leaders with unicorn experience. This is not surprising. However, some interesting variances emerge when we add data on the geographic distribution of all companies (not just unicorns) to the analysis.

Germany, for example, captures a disproportionate share of total unicorns, as well as share of founders and leaders with unicorn experience, relative to its share of all companies. Sweden and the UK follow the same pattern. France, by contrast, under-indexes on unicorns relative to its share of all companies in the dataset, even though in absolute terms it is still a key driver of European unicorn creation.

Digging into talent recycling, we see that Revolut (United Kingdom), Delivery Hero (Germany) and Klarna (Sweden) have spun out the highest shares of the tech 'alumni' in our sample. Out of the top 30 companies for talent recycling, these three companies alone have played a role in the careers of a third of all 'alumni' founders and leaders.

A small number of companies have a hugely outsized impact - not only driving the talent recycling but also setting the tone for the subsequent companies and wider ecosystem. With them they are bringing along the mindsets, perspectives, culture and tools from their previous employers.

What is also striking is that a majority of Revolut and Klarna talent has spun out outside of the company headquarter, participating in cross-border knowledge dissemination. Looking at the example of Revolut, out of the total cohort of tech talent that has since left the UK-based Revolut to start their own company or go on to leadership positions in other European tech companies, more than half of them have gone to do so abroad.

Here we look at the difference between VC-backed Bay-Area and European tech companies in the way their office footprint is distributed globally and in particular away from the company's official HQ ("foreign country"). Foreign country in this context is any country globally that are not the company's country HQ.

In the US, more than 50% of VC-backed companies have exclusively US-based headquarters, and only 30% have headquarters in three or more foreign countries. In Europe, this is almost exactly flipped, with nearly 50% of companies having headquarters in three or more foreign countries and only 30% having headquarters in their country of origin. Ultimately, European tech companies tend to expand outside of their headquarters a lot more than US companies. This cross-pollination contributes in the strengthening of the European talent base.

This analysis looks at all unicorn companies in our sample, and compares their respective country headquarters with the country of its 'alumni' founders.

For smaller ecosystems, the share of founders spun out abroad in satellite offices is much bigger than for those larger countries like France, Germany or the UK. For example amongst our sample set, out of the 20+ founders and leaders with experience working at Collibra, 78% are based away from Belgium (France is a hotspot!).

It shows how interconnected the different countries in Europe are and how a successful outcome for a company originating from Belgium, Austria, the Netherlands or Estonia can have positive ripple effects all across the continent. This provides natural bridges across different countries in Europe, fostering the development of hubs away from the unicorn birth country with sector expertise and scaling up knowledge.

How early on do European companies start expanding through Europe, fuelling the interconnectivity of the talent base? Looking at rates of expansion by company stages, European expansion appears almost as a "pre-requisite" for Series B companies: regardless of when they were founded, a similar portion have reached the milestone.

The stage at which founders consider European expansion is highly dependent on where they are based. While Series B+ is usually seen as the "scale and expand" phase, founders in countries like Finland, Ireland and Italy are more likely to consider the leap as Series A. This highlights the importance of enabling connectivity between "smaller" ecosystem and the rest of Europe, to increase the size of the potential outcomes for these companies. We explore this theme further in chapter three.

We compared the most popular countries where companies set up international offices across the dataset of European $B+ companies started between the year 2016 and 2020 with Series A and B companies that have raised more recently (2021-2022). It reveals that scale-ups have so far focused more on the US and UK markets, compared to mainland Europe. This might be due to the UK and United States being perceived as the first foreign market to conquer. Once a startup has been able to scale up all to way to unicorn status, more companies go on to establish offices across the globe.

Through our sample of tech founders and leaders, we analysed more than 21,000 moves across European borders - and 40,000 moves between cities. This analysis highlights the inflows and outflows of talent in each country, and how these flows have evolved over time. For example, we can see that in the period 2020-2022, France has had a 2.2x net inflow of founder and leadership talent. In other words, for every tech leader that moved out of the country during this period, there were more than two that moved into France.

The data shows how certain ecosystems have been able to transform their talent flows over time. Most notably, France, Germany and Spain saw huge gains in inflow of founders and leaders in recent years. By contrast, other ecosystems, like Belgium and Ireland, have seen a small decline in net inflows.

It's important to note that this analysis is based on a data sample that exclusively looks at founders and C-Level leaders of companies that received investment in 2022. As such, the conclusions we can draw from these trends are limited by the scope of the analysis.

Tech salaries vary significantly across Europe and the US. This analysis focus on a sample of 10 cities in Europe in which the most US companies open up their overseas offices. The stark difference in salary levels for tech gives a hint on what incentives these US companies to open offices here in Europe.

On average across the mapped tech related roles, US employees make nearly 40% more than their European counterparts. The largest average difference is for DevOps Engineers, who make nearly 60% more in the US than in Europe, followed by Product managers who make roughly 45% more. Across the sample, Stockholm deviated the least from the US average while Warsaw deviated the most across all roles' salaries.

The gap between US and European founders' base salaries has been a recurring theme in past editions of this report, as we seek to understand the factors that encourage talent to enter and stick with entrepreneurship.

2021 saw the salary gap significantly narrow across all funding stages, as European founders stepped up their base salaries while US ones largely stayed flat. Yet, the tailwinds of this year seem to have reversed this trend: across all stages the gap has widened again in favour of US founders. Median salaries of European founders dropped to 2020 levels, while US founders increased their base salaries. The gap is particularly stark at Series A and Series B. Interestingly though, the gap that was widest in 2020 - at Seed-stage - has increased the least in the past year. Seed stage is the only one where European founders's median base salaried have continued to climb.

Adding in incentive pay provides a fuller picture of founders' financial situations. Across the board, incentive pay is multiples higher in the US than in Europe. And this gap has also been widening.

While incentive pay at Seed-stage is much lower than base salary in both the US and Europe, it has decreased much more steeply in Europe over the past 3 years. In 2020, US median Seed-stage incentive pay was 1.7x greater than Europe's - by 2022 it was 3.2x greater. This is the most extreme example, but across all the stages incentive pay has decreased relative to the US since 2020.

Total salaries (base + incentive) have generally increased or stayed nearly the same in the US over the past three years, whereas European total salaries have decreased up to 13%, as seen at Series A.

While some incentives have decreased, median founder equity in Europe has remained relatively stable over the past year, and is currently on par with the US. This is with the exception of Seed-stage, which saw a 3.8 percentage point decrease in Europe, compared to a 1.6 percentage point increase in the US. From Series A and onward however, median equity has either stayed the same or slightly increased, while the US has seen slight decreases.

European founder salaries fall into a relatively wide range, with the top quartile taking nearly twice as high as the bottom quartile, across all stages. The gap is largest for Series C companies, but is closely followed by Seed-stage, where 25% of founders take base salaries of less than $56K per annum.

Unfortunately, through both the ups and downs of the past several years, women founders' share of investment has remained relatively stagnant. 87% of all VC funding in Europe is still raised by men-only founding teams, while the proportion of funding raised by women-only teams has dropped from 3% to 1% since 2018.

Meanwhile, the proportion of deals made by women-only teams has stayed at around 5-6%. This means there is a 2-6x gap between the number of deals going to teams of women and the actual amount invested in them, depending on the year. In short, even when women-only teams successfully raise a round, they are likely to receive less - and this pattern is trending in the wrong direction. Looking at mixed teams, these captured only 10% of all rounds raised so far this year - down from 12% last year. However, their share of total funding has slightly increased to 12%, meaning that the amount of funding per deal is improving.

Overall, when considering the record levels of funding that poured into the ecosystem in 2021, it's disappointing to see so little of this influx distributed to women founders.

The total amount invested in European tech is expected to decline in 2022 compared to last year's record levels. But the decline is not even across the board. Looking at investments with available information on team gender composition, funding levels are down similarly across men-only and women-only team, with about a 30% decline. However, the funding environment for founding teams made up of both men and women has been more resilient, with a total decline of 11%.

Zooming in on the portion of deals captured by women, the data shows glimmers of encouraging trends - the share of deal count going to women-only teams has increased in the earlier stages compared to 2021. Yet, an opposite trend is evident for mixed gender teams, where the share of deal count captured has decreased compared to 2021 levels.

While the representation of a more diverse set of founders among the founding team is ultimately was matters and for that "mixed team" is a great proxy, looking at all-women teams can tell us more about gender specific prejudices/barriers women face in fundraising (that may not affect women in mixed teams in the same way). There is a big disparity in the average round size raised by all-men founding teams compared to all-women teams.

This gap is most pronounced at Seed-stage, where its has also grown over time. Comparing this to the average size of Seed rounds raised by mixed-gender teams - which is broadly on par with all-men teams - it becomes clear that women founders face gender-based barriers, and that these may be most pronounced for young women starting their entrepreneurial journey.

Tracking this disparity across stages, we see that the gap has persisted for Series A rounds over the last two years. Once we get to Series B, the data becomes less useful for tracking average round size, and instead illustrates just how few of these teams make it that far. Across the five year period we analysed, we only found data on 6 Series B fundraises for all-women teams. 4 took place in 2021, with Beauty Pie notably raising a $100M Series B.

Total capital invested is a lagging indicator and has a compounding effect on the lack of diversity in founding teams, as those currently raising the biggest rounds were formed longer ago. Deals of less than $5M tend to be a more helpful proxy for progress, as they represent early-stage companies, and the new teams that will shape the future of the sector.

Although women-only teams receive tiny portions of the overall funding pie across the continent, some countries are showing progress at the earlier stages. In France, for example, the share of rounds below $5M raised by all-women teams is up from 3% to 7% since 2018. This is a trend in the right direction, and a small but positive sign that the funnel for future funding is getting more representative.

Ireland leads the pack in terms of founding team gender diversity: of all that raised funding in the last five year, 10% of theirs are all-women, and another 11% have women included in their teams. Portugal has the highest portion of mixed-gender founding teams at 17%. Spain and the UK follow behind Ireland in share of all-women teams, at 7%, while the Czech Republic has the lowest percentage, at 3%.

Women's representation is not automatically improved by increasing the size of the overall pie. One clear sign is that, looking across European countries, gender parity and total funding are not correlated. Some countries that rank highly for total investment - like Sweden, Ireland and Finland - also lead in the number of rounds raised by teams with women founders, as a proportion of their female population.

On the other hand, France and Germany are among the top three most VC funded countries on the continent, but see far fewer funding rounds going to women, per capita. Respectively, they see 23 and 18 rounds per one million working women - which is only 31% and 25% of Sweden's figure.

Looking at the ratios of rounds going to all-men vs. all-women and mixed-gender teams, the gap is steepest in the Czech Republic where there are more than 9x as many funding rounds per working men than per working women. The average across Europe stands at 4.3x, and stands best in Ireland, Spain, and Portugal.

The most impactful progress on gender happens at the start of the talent funnel, when women founder and leaders entering the pipeline. And if we compare the 'cohorts' with 15+ years experience to those with less than five years experience, we see women represented by 8%-points more. While not a huge leap, it's a step in the right direction.

While representation is different for women founders compared to other women leaders, it follows a similar trend across cohorts. Looking at everyone with less than five years experience, the share of women leaders (29%) is twice as high as the share of women founders (14%). The share of both gets smaller the more experienced the cohort we look at, but the proportion stays similar: At 15+ year women leaders are down to 12%, and women founders are down to 6%.

It's important to note these numbers are based on our dataset of founders and leaders that received funding in 2022, and are therefore not 100% representative of the wider ecosystem (which we explore in more details in chapter 2.2).

Gender parity isn't just relevant among leaders, it's important across all roles in the ecosystem. In particular, technical talent is an area where women have historically been underrepresented.

Research from TalentUp reveals that while women are still underrepresented in technical roles, certain areas are more balanced than others. Product managers have the highest proportion of women at 40%, followed by quality assurance ("QA") engineers (37%) and data scientists (31%). While nowhere near gender parity, this highlights that there's plenty of female technical talent in the funnel. There are some small differences across countries (five percentage points): Spain tops the chart, while France and Switzerland are the least diverse.

Turning from the founder to the investor landscape, the gender imbalance is even starker. In 2022, only 1% of VC funding was raised by women-only GP teams, and 15% by GP teams with both men and women. The vast majority of LP’s funding - 84% - went to GP teams comprised of only men.

A key ingredient for increasing investment in women entrepreneurs is having a diverse set of decision-makers and cheque writers. Looking at a breakdown of General Partners at European VC firms in 2022, only 13.5% are women. This is marginally better than the 12.2% reported in 2021.

In recent years, there's been a rise in programmes designed to democratise the knowledge and skills of the VC industry, in order to diversify the industry. Baby VC (based in France), Future VC (global), Included VC (global), and Newton Venture Program (based in the UK) provided some background data to give a sense of their activities.

Over the past 5 years, they have onboarded a combined 1,500 participants across these programmes. 250 of those have since become investors, and while this is an important metric of 'success', there are also many other benefits and success stories emerging from these programmes. Many participants go on to raise a fund or micro fund to begin angel investing, secure VC or startup internships, take full-time positions in startups, or use their VC knowledge to raise for their own startup.

When we asked survey respondents who reported having faced discrimination about the the nature of that discrimination, the majority mentioned gender. Next were age and nationality, and more than 20% mentioned ethnicity. While discrimination based on disability, religion, and sexual orientation was mentioned much less, this is partially because very few people in the respondent base identified as a minority in those areas. Notably, several respondents also mentioned discrimination related to pregnancy, motherhood, or general family care within their free text responses.

There's no denying it - the 'unicorn club' is overwhelmingly male. This is no surprise- all women teams account for 6% of all funding rounds in 2022, yet only receive 1% of the funding raised. Some women are able to overcome these odds, but it's a steep climb.

On their journey to unicorn status, companies founded by all-male teams represent 88% of all rounds raised, yet they take in nearly 92% of the funding. Mixed-gender teams (with minimum one women) represent 12% of these rounds, but their share of total funding is even smaller, at 8%. Interestingly, this gap is reversed for mixed-gender teams if we look at all companies (not just those that reach unicorn status): they represent 10% of rounds raised, but 12% of all funding. In the entire dataset we used, only no European unicorn company was identified with an all-women founding team.

Teams with at least one founding member from a minority ethnic background represent less than 13% of unicorn companies, though when they do raise a round, they tend to raise slightly more, with their total share of funding at just over 14%.

Teams made up of all minority ethnic founders are even more underrepresented. They make up just 1.4% of unicorns, and the rounds they raise are disproportionately small at only 0.7% of total unicorn funding - half as much as would be par with their share of rounds.

Looking across unicorn companies, the sector with the most female founder representation is - by quite a long way - the built environment, where half (3 of 6) founding teams include female founders. Enterprise software and enterprise infrastructure follow with around 20%.

As for the sectors with the highest ethnic minority founder representation, enabling technologies and communications both see 30% of teams with at least one founder from an ethnic minority, and 10% with minority-only teams. Information has the next highest proportion of minority-only teams, at 8%. Clean Energy is the only industry in the sample where all eight teams mapped are all-white.

Where are the unicorns with underrepresented founders located? Denmark tops the charts for highest proportions of unicorns with mixed-gender founding teams, at 22% (2 in 7) while the UK has the highest number absolute number at 18 mixed gender or all women teams.

Teams with ethnic minority founders are most common in Switzerland (36% or 5 of 14), the Netherlands (20%, 5 of 20) and Austria (20%, 1 of 5). Norway's unicorns have the highest proportion of all-minority teams in Europe, at 8.3%- to reach this rank it only took one team in 12 to qualify.

In collaboration with Dealroom, we set out to identify the largest deals going to all-women teams in 2022. Looking at the business models in this table, it's notable - though perhaps not surprising - that many have a focus specifically on female health. This may be evidence of the idea that underrepresented founders are likely to increase attention on issues and opportunities faced by their own group, that have gone unnoticed or undervalued by other founders and investors.

Looking at the top 10 largest rounds raised by founding teams that include both men and women, the scale of deal sizes expands significantly compared to women-only founding teams and includes many rounds sized over $100M or more, including a $550M Growth round raised by Finland's Relex Solutions in February 2022 and Newcleo's $330M Growth round from June 2022.