2024-01-07 06:03:54
The gender gap continues to exist in the European venture capital sector, as only 16% of general partners at European venture capital firms are women, while only 2% of startup funding in Europe goes to projects led by women, according to the latest European Women in VC report that has just been published and which analyzes the world of Venture Capital from a gender perspective.
Based on the statistics, it seems that for now investing in startups is a man’s thing since women have a minority role in general. Particularly in the world of Venture Capital in Europe and in Spain, on average there are 20% of women investors. If you look in detail at the highest positions and with more responsibility General Partners are 10% (In Spain 13%, 3 points above the European average) and in the most junior intermediate positions (Principals) close to 30%. %. But not only are there fewer women, but the percentage of funds they invest is not proportional. Women are not responsible for making decisions about 20% of investments but only 9%. Figures that have remained static between the last 5 and 10.
But why are there fewer women investors than men and why are fewer projects led by women financed? In the opinion of Blanca Drake Rodríguez-Casanova, head of innovation and marketing at Telefónica, there are certain social and cultural factors that explain this and that are limiting the number of more women. «Gender stereotypes, unconscious biases when hiring. The working day in the private equity sector is usually especially long, which makes conciliation difficult. Also the lack of references and role models can make women feel less inclined to enter this industry. There is also a historical gap that has led to the creation of networks and professional connections that women are having a hard time entering and that are key,” says Drake.
The lack of references means that there are fewer women investors
Based on the statistics, it seems that for now investing in startups is a man’s thing, with one very interesting exception, adds Drake, and that is in the case of Business Angels in Spain. If in 2019 there were only 10% of Business Angels who were women, now they are 37%.
WA4Steam is a non-profit association of women Business Angels that invest and support startups in early stages of development (seed investing) in the STEAM field, led by women. It was established in 2018 and currently has 170 members throughout Spain and also in 11 countries. «We invest in startups in which there is at least one female founder and who has a relevant participation in the share capital and an important position in the management team. That is our mission, that there are more women who undertake business, especially in these areas of science, technology and innovation, which is where fewer women do it,” explains the president of this association, Blanca Ochoa. «We emerged 5 years ago during the celebration of a program for Business Angels by the EU at IESE in Barcelona. The EU detected the need for more women to be entrepreneurs in the field of innovation. It was seen that one of the main obstacles came from investment. Very few funds reach women and that is also because, on the investment side, both among Business Angels and in Venture Capital and Private Equity, there are very few women,” explains Ochoa.
WA4STEAM partners have invested 2.6 million euros since its founding, in 49 rounds of 28 STEAM startups founded or co-founded by women. With an average investment per startup of 92,000 euros, the highest ticket recorded since its inception is close to 300,000 euros. «Every month we contribute a project and if it arouses interest among the associates we invest. As we have grown and developed investment skills, we are investing 100,000 euros between us. We do everything democratically and in a very accessible way, the only obligation is to invest 1,000 euros per year. The members of WA4STEAM not only seek to obtain profitability as business angels but we aspire to become strategic partners, promoting future female leaders and reference models. The wealth of professional profiles of the associates, together with a dual investment approach based on socioeconomic profitability and technological impact, in addition to solid values, make WA4STEAM a unique organization,” says Ochoa.
Women investors show clear support for projects led by women, a crucial support since the female presence on steering committees is directly related to increasing financing possibilities and access to 9% of assets under management (AUM). This means that, if a female entrepreneur has a female investor in front of her, she has up to 3 times more chances of obtaining financing than when the investor is a man, explains Blanca Drake. Helena Torras is one of those women investors who firmly believes in supporting entrepreneurs by accompanying them on the path of entrepreneurship. She is a venture Partner at Hans (wo) menGroup, investor and independent advisor, as an entrepreneur who has been, she perfectly understands the challenges of the founders. She is also an independent director at Lucta and Mastertech and belongs to the Governing Board of BarcelonaTechCity and is an Ambassador of the BHH. Serial entrepreneur, involved in various startups either as a co-founder or as a member of the entrepreneurial team, she has established operations in the United States, England and Spain and has been a member of the Board of Directors in both Spain and the United States, having obtained private financing from more than 30 million dollars. Her passion for technology startups has led her to invest in more than a dozen technology startups in recent years. «When I started as an entrepreneur 10 years ago there were few, now there is beginning to be another culture where women are given way. But although the number of women investors has grown, there are few investment fund partners,” says Torras. Helena has received several recognitions for her work in the world of startups and venture capital, including being considered one of the 100 most influential women in Europe in this sector, one of the 30 people in the technology sector to follow in Twitter, Top 100 Women Leaders in Spain, EUTop50 Investor Award, Investor of the Year 2021 by D+I, one of the 100 leaders of digitalization in Spain, and Woman of the Investor Ecosystem Award by Bigban in 2023.
In the investment committees they decide who to invest in and that is where there are few women
Private equity is undoubtedly a competitive sector like many others in the financial world. Level 20’s goal is to reach 20% female presence in director or partner positions in private equity, without an established time horizon. Sonia Fernández is the president of Level 20 Spain, an association founded in London and that has operated in Spain since 2018 to support female talent and encourage women to join the world of venture capital and private equity. «The investment committees are the ones who decide who is invested in and that is where there are few women. Better decisions are made when there is a more diverse group. In the world of private equity there are around 6% of women in decision-making bodies and in venture capital, it is 13%. In general the numbers are low,” says Sonia Fernández. In 2016, this investor joined the venture capital firm Kibo Ventures as a partner, where she makes investments in Series A rounds in technology companies and, to date, they have promoted more than 60 startups.
Private capital is a risky sector by definition and fewer women dare to enter
Only 2% of all venture capital funding goes to companies run by women and HearstLab is the community of founders, investors and industry experts committed to changing that 2%. Azahara García Espejo is director of Hearstlab International, the investment arm from Hearst Corporation. It operates like any other fund, investing in companies with a technological startup profile, most of them b2b and initial phase, becoming partners of the company in addition to providing value through other services to help them grow. «Women continue to be more risk averse, and private capital is a risky sector by definition, which is why we find fewer women who dare to undertake but also to invest. Our objective is to bring women closer to private investors while trying to increase the number of female investors, especially in those venture capital funds that are currently led by men. On the other hand, there is a gap in the market for very good entrepreneurs that no one is seeing and what we are doing is betting on a winning horse, since we believe that the woman who has made it this far is by definition good,” Azahara points out.
In recent years, many initiatives have been created to promote female entrepreneurship, such as the Startup Women Awards of the Spanish Startup Association, or Female Startups Leaders, the largest network of entrepreneurs in Spain. It was founded by Laura Lozano (also founder of the startup Chargy), Esther Molina and Carmen Hidalgo in 2020 as a group of Spanish startup leaders. It has become a non-profit association that brings together founders of innovative Spanish-speaking startups, inside and outside Spain. Lozano is also co-founder of Skirion Enterprises, an investment fund that invests on the one hand in crypto assets, and on the other, in startups with great impact in the sectors: Technology, Health, Real Estate, Tourism, Aerospace and Energy, explains Lozano. Her investments include PLD SPACE, in the aerospace sector, Energy Solar Tech, a renewable energy electric company, and the rental management startup Alterhome.
Funds managed by mixed teams have higher profitability
The Venture Capital (VC) ecosystem still lacks diversity: only 30% of investment committees have female partners, and only 12% have members from other minority groups. However, the profitability of VCs with women in the most senior positions improves the profitability of the funds. According to the results of the European Women in VC report, teams led mostly by women have a result that is 9% higher than that of men, while a 10% increase in women in VCs implies an improvement of 1.3% of the IRR of the VCs.
The results of the European Women in VC report in which Telefónica has participated and sponsored are based on a survey of 104 European-based venture capital companies representing 220 funds with assets under management (AUM) worth almost 12,000 million euros, as well as a sample of PitchBook data from 558 European-based venture capital firms with assets under management of €148 billion.
The report also states that women have less investment power, they only manage 9% of total assets compared to the 91% managed by men and furthermore, women investors only access 9% of risk capital. Whether due to unconscious bias or structural barriers, women have to work harder than they should to access the capital they need. This result highlights how far European venture capital investors are from achieving gender parity, not only in managing capital, but also in obtaining it. The largest gap exists in venture capital funds, with total assets under management (AUM) of more than €500 million, where the percentage of female shareholders is only 10%. They have up to 40% in micro funds with less than 25 million euros in assets under management.
Another Harvard Business Review study also showed evidence that diversity improves financial performance, as women may also be more willing to invest in companies run by other women, opportunities that other funds run by men may miss. Additionally, adding more women to the investment team could generate more diversified portfolios, while a lack of diversity could generate unconscious biases that affect funding decisions. As a positive result of the survey included in the European Women in VC report, 47% of European venture capital funds expect the number of women to grow over the next five years.
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