State of DEI

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.

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.

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.

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.

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).

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.

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.

Current progress on diversity and inclusion is nowhere near fast enough. But that doesn't mean it's not possible. If we zoom out and look across the past five decades, we see important and sustained progress to build on.

Below, we have labelled unicorns as 'diverse' if they have at lease one woman or ethnic minority founding member - not as a perfect proxy for inclusion, but an indicator of broad shifts. While the sample size for the 2020's is small (we're only two years in after all), it is an encouraging sign of what may lie ahead, if players across the ecosystem put their weight behind the mission to increase diversity, equality and inclusion.

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.

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.

Fostering an entrepreneurial ecosystem means ensuring it can welcome and include talent from all backgrounds and walks of life. Developing and accessing diverse talent also provides an important means by which the ecosystem can address the persistent struggle to find skilled talent. But as progress on Diversity, Equity, and Inclusion (DEI) continues to remain elusive, we wanted to understand survey respondents' thoughts on what the most impactful investments are that European tech could implement to make better progress possible.

Respondents across all genders cite long-term investment in educational and social equality as the main catalyst for progress. While other initiatives like internships and conscious bias training are also rated as impactful, there is a clear role for governments to play here. They are best positioned to foster, support, and supplement civil society efforts like not-for-profits, foundations, and other volunteering and philanthropic efforts from industry participants.