Entrepreneurship

What is the gender entrepreneurship gap?

What is the Gender Founding Gap?

98%

Let us introduce you to the most striking gap in a woman's life. It's about access to big money, to growth capital. The world of startups is biased and unequal. Women and their ideas are given 98 percent less capital, 98 percent less chances to thrive and grow.

Backlash in Pandemic Year.

2020 has been a tough year for many startups and an especially tough one for female-led startups. Investors were even stingier with women than usual. In 2020, databases like Crunchbase reported 12 percent less money for the startup scene in general, and 22 percent less money for female entrepreneurs.

The really big financial stories also weren't written by women. In Europe, during the Corona year, not a single major deal over 50 million euros went to a women's team. Despite the fact that 13 percent of companies were founded by women, only just 1 percent of European investor money went to female founders. In the US, the number is slightly higher at 2.4 percent - but it's still a mere crumb of the money pie.

So why do women's ideas have fewer chances?

Globally, venture capitalists are male. In Europe, men are managing 90 percent of the seed money to be allocated and 93 percent of partners in VC firms are men.

And these men, in turn, primarily move within male networks. What happens, when a woman makes it to center stage in the theater of male financiers and is allowed to "pitch"? Is she then given a fair chance of winning a deal? Not a chance.

An experiment at Harvard University exposed this. Identical slides about a business model were presented one time by a woman and one time by a man. When the man presented, the audience rated it as a significantly better investment.

Measured with different cubits.

Another study from the same renowned institution showed that investors ask male founders primarily about opportunities and profits, while female founders are asked about risks and losses. And an evaluation of the document platform Docsend showed that male investors were far more critical of female founding teams. They spent 50 percent more time back-scratching, tracking down mistakes, and questioning models in the case of women. This difference is huge.

Before investing money in female founders, venture capitalists prefer to invest in people who look like themselves - without fear of loss. This so-called "bias," one's personal bias, has been sufficiently demonstrated by behavioral economists.

A vicious cycle of capital

This vicious cycle naturally also applies to all other accesses to capital, even loans. Even in banks, it is still predominantly men lending to men.

Female founders are more successful

If investors only invest in others who look like them, the business world is systematically excluding people. And these people are women. On a global scale, men dominate the economy, be it on the executive floors, in global trade, or in the large money sources such as venture funds that decide on innovation and progress. This kind of economic system thus misses a lot of talent and brilliant ideas that could help us move forward as a society. In contrast, the hype about young, white, male founders has led to many bad investments and inflated IPOs.

By the way, in technical terminology this phenomenon is called a "misallocation of resources", or simply economic nonsense. Especially since various studies highlight that female founders are actually more successful than male founders. For every dollar invested, women make 78 cents in revenue, men only 31 cents.

The facts are there. Insight is what's missing.

Close the Gaps

In Germany, a number of campaigns are underway to break this vicious cycle. For example, there are calls for a women's quota - at least for public start-up funding. After all, public money should go equally to women and men. Switzerland is still a long way off from achieving this. As is often the case, there is a lack of accurate data to measure and address the problem.

Only when these large streams of funds begin to reach women as well, can their ideas and products start to benefit society as well. Entrepreneurial courage must be equally rewarded with a fair playing field in the competition for investors' money.

ellexx has experienced these stereotypes and obstacles itself and struggled for three years to get funding.

The ellexx movement wants to change that.

You too? Be part of it!