How to change gender inequality in start-up funding?
I started working as a female Venture Partner at better ventures 6 months ago. Since then, I have talked with more than 150 start-ups about their businesses. I am aware that unfortunately, only 16% of founders in Germany are women. But I was still surprised about how few female founders came to us asking for funding and support.
We conducted a survey of 110 early-stage founders on their biggest challenges. 76% of female founders stated financing their company as one of their main struggles. 48% of them use grants as funding source, only 19% business angels, and only 10% VCs. For comparison: 19% of male respondents get funded by grants, 27% by business angels, 12% by VCs.
Do women prefer other funding sources than men? Or are they disadvantaged when trying to raise money from investors?
According to female founders monitor 2020 33.1% of female-led start-ups prefer business angels as funding source. But only 7.7% of female founders could win business angels as investors. The situation is quite similar when female founders are aiming for VC funding. This gap shows: the few women who dare to start their own company in Germany seem to struggle with access to investors! How can we change that?
I talked with two female founders and a female investor about their experiences with fundraising and what must change to close the gap:
Romy Lindenberg is the founder of shavent, a start-up that makes wet shavers comfortable and plastic-free.
Eva Wüller is the founder of Ovy, a female tech start-up that helps to plan or prevent pregnancy.
Gesa Miczaika is a partner at Auxxo Beteiligungen and board member at German Start-Up Association.
Maira: Studies show that female founders are struggling to raise external capital. What experiences have you had while fundraising?
Romy: I decided to go for crowdfunding as a funding source because autonomy is important to me. I aim to build a track record first before even thinking about getting external investors in.
Eva: I personally have not had bad experiences as a female founder pitching for funding. But as a female tech-start-up it is definitely tougher to address male investors.
Maira: Why is that?
Eva: They often do not understand the product or say they will have to send the pitch to their wives. Still, we have a lot of male investors onboard. Certainly, also because there are very few female investors out there.
Gesa: The inherent similarity bias is one of the main reasons for this. Most male investors are simply not interested in female tech topics or female products. When it comes to deep tech or crypto topics they may not understand how it exactly works, but they personally like the topic and thus still invest. I also tend to invest in topics I am interested in. Unfortunately, most of the investors in Germany are still men. So, start-ups with products or services addressing women or founded by women are structurally disadvantaged. That is why investment teams should consist of people with different backgrounds, experiences, and genders.
Maira: True! Different people looking at the same deal from different angels is incredibly valuable. What do female investors do differently than male investors?
Gesa: Just as male investors I also apply my similarity bias, except that my similarity bias is female. My female co-investors and I read female reactions in pitch meetings differently than men. When a female founder says that she is not an expert in a certain field, she probably is an expert but does not want to brag. Some women sell themselves short. We consciously question these kinds of statements.
Maira: I recently read an article about female and male founders getting asked different pitch questions by investors and this affects how much funding they get. What are your experiences here?
Romy: In one of my previous companies, we fundraised as a mixed-gender duo which worked quite well. An awkward bit too often I had to roll my eyes at the friendly first sentence “So, I assume you are doing marketing?”, while I modeled the wall-covering business case and steered operations. But then during the pitch discussions, the initial surprise settled and we were able to discuss at eye level. It's sad that counterparts stick female founders into boxes first. But I always proved myself and thus did not really struggle in funding rounds. I often hear stories about female founders being ridiculed when pitching to investors. I think that is why some female founders don't feel like approaching business angels or VCs.
Eva: The majority of men act bolder when pitching to investors. They show huge self-confidence even when they have no traction for their business yet. My co-founder and I never felt disadvantaged by investors in pitch meetings. Sometimes it can also be a benefit to be a female founding team. You stand out from the male founders' line-up that investors see day after day.
Maira: Interesting thought! Yet, only 1.6% of female founders get funded by VCs, only 7.7% by business angels. What are your tips for female founders to win over investors?
Eva: Be confident in your solution and have your numbers straight!
Romy: Women tend to be very good at immediately discarding their own ideas when they are disliked by others. This is not helpful in a start-up pitch. My advice for female founders: We tend to arrive overloaded with data and proof of concepts for our ideas anyways – make sure you don’t forget to also bring your “What? Of course, this is the most awesome idea ever”-attitude! If you – like me – use to easily fall for the “not good enough idea” trap, start to collect screenshots of all the ads on social media, that promote the craziest startup products – when I feel in doubt about my ideas, I always go back to my little collection and assure myself: if THIS flies, my idea will skyrocket!
Maira: Only 3% of partners in VCs are female in Germany. How can we inspire more women to become start-up investors?
Gesa: Together with my partners, I launched the Evangelistas, a circle of female investors who exchange, co-invest, and learn from each other. Having done at least one start-up investment is a prerequisite for membership. But we have accepted 5 successful female entrepreneurs without investment experience. As a group, we want to encourage them to become investors. My tip for women who aim to become start-up investors: just do it! Join a business angel network to do co-investments with. And only invest if you can do at least 10 start-up investments to diversify your risk. Most investments don’t pay off. But if you invest in 10 start-ups or more, the chances are higher that at least one will take off.
Maira: Thank you for these fruitful discussions! My key takeaway: If we want to diversify who gets funding to start and grow innovative companies, we also need to diversify who funds them. And give them easier access to those investors.
Are you an early-stage founder looking for smart money and support? Let's talk! As a diverse investment team, we actively look for equal opportunities for female and male founders. Most investors focus on dismantling the business side, yet, team insights are equally important. That is why we ask many team questions and also do personality tests trying to eliminate biases as much as possible.
Will we challenge you? Yes, of course! We will ask a lot of questions. But always in an honest, respectful, and trustworthy way. We believe that founders, women and men, are the driving force to build a better world. We are here to make you succeed.