Why are women entrepreneurs missing out on funding?
Reflections and considerations
Executive summary
About the European Investment Bank
The European Investment Bank is the world’s biggest multilateral lender. The only bank owned by and representing the interests of the EU countries, the EIB finances Europe’s economic growth. Over six decades the Bank has backed start-ups like Skype and massive schemes like the Øresund Bridge linking Sweden and Denmark. Headquartered in Luxembourg, the EIB Group includes the European Investment Fund, a specialist financer of small and medium-sized enterprises.
Prepared for: The European Commission
By: Innovation Finance Advisory
Authors: Surya Fackelmann, Alessandro De Concini
Supervisor: Shiva Dustdar
Consultancy support: PitchBook
Contact: [email protected] Date: June 2019
ISBN 978-92-861-4645-9 (ebook)
ISBN 978-92-861-4646-6 (pdf)
doi: 10.2867/663414
QH-02-20-186-EN-E
Why are female entrepreneurs missing out on funding? Reflections and considerations - Executive summary
© European Investment Bank, 2020
All rights reserved.
Cover photo: © Shutterstock
All questions on rights and licensing should be addressed to [email protected]
Disclaimer
The opinions expressed do not necessarily reflect the views of the Advisory Services, the European Investment Bank, or the European Commission.
The terms and conditions are intended as an outline for discussion purposes only and made on an indicative basis. This report is provided without any liability whatsoever on the part of the EIB and shall not constitute any obligation on the EIB to extend credit facilities or to carry out a due diligence review of the aspects relevant for the financing of a project.
Neither this study nor any of its contents may be duplicated, published or used for any other purposes without the prior written consent of the EIB.
This Executive Summary is a precursor of the Main Report, to be published June 2020. Small discrepancies may exist in the content of these two publications.
Executive summary
Empowering women remains a common denominator and a global imperative for all those who care about fairness and diversity, but also productivity and growth of societies and economies that are more inclusive. If we can achieve this, we all gain.
Christine Lagarde, ECB President and former IMF Managing Director
Pick any of these indicators: potential increase of 26% of global annual GDP and of $160 tn of human capital wealth; 15% likelier better business performance; $5.9 tn estimated additional global market cap1. What could we do in order to attain these indicators? The answer lies in addressing the gender employment gaps and the lack of gender-diverse decision making among the financial and business community globally. The world over, one of its best assets is underrepresented, undervalued and unevenly treated. All this, despite the evidence and data points confirming that supporting women’s economic empowerment makes not only ethical and social but also economic and business sense.
With this report, we attempt to contribute to the existing body of evidence by assessing the access-to-risk-capital conditions for women-driven companies. In particular, we analyse the trends of venture capital funding for women-led and women-founded companies in the EU and, by comparison, in the US and Israel to contextualise emergent cross-country and regional barriers and gaps. Data from PitchBook has been complemented by interviews with market practitioners of the European venture community and other stakeholders.
We find that disparities persist, with women-led companies still accounting for a small portion of deal flow and overall volume invested. That said, the rate of growth has increased across every region examined in this study, with a key contributor being the unprecedented increase in late-stage investment.
However, structural inequities and persistent biases in terms of both the supply of and demand for finance still hinder the transition to a more balanced, more accessible and ultimately better functioning funding environment. For this reason we put forth and analyse a number of options and considerations – both financial and policy-related – that could help accelerate this transition.
A growing number of investors from diverse backgrounds have come to realise the benefits of actively promoting women’s empowerment. And we have seen that as a result of this global step change, European institutions, EU Member States, FTSE 100 and other blue-chip companies, international financial institutions, and we here at the EIB, are stepping up to the plate on gender equality.
Alexander Stubb, Former Vice-President, EIB
An overview of venture capital investment into women-led companies2
Our approach is to gain a sound market overview of the funding landscape for women-driven companies and to embed this in a qualitative analysis of access-to-funding conditions for this constituency. We also analyse the state of play of women in the investor community and the role of female investors as a potential key driver to mobilise more capital for women-driven companies.
Specifically, this report collates the latest research on venture capital (VC) funding from the perspective of women-led start-ups in the 28 Member States of the EU. It performs a comparative breakdown of investment activity in the US and Israel to contextualise emergent cross-country and regional barriers to finance in the EU. The period of study spans a decade. We provide an assessment of the challenges to securing external funding from institutional investors encountered by women-led companies across industry and sector, using quantitative and qualitative analyses of the VC financing landscape, based on criteria such as company size, funding stage, and transaction type. The findings are supported by interviews with market participants in the European venture investment scene to identify potential solutions to the funding gap between men- and women-led companies, both public and private.
Glossary: Venture capital funding is defined as equity investments in start-up companies from an outside source. Investment does not necessarily have to be from an institutional investor. It can be sourced from individual angel investors, angel groups, seed funds, VC firms, corporate venture firms, and corporate investors. Investments received as part of an accelerator programme are excluded, but further financing is included if the accelerator continues to invest in follow-on rounds.
Despite significant structural disparities, we find substantial evidence in support of an optimistic outlook for women entrepreneurs in all three territories, and notably in Europe. Overall, the data suggest that the investment climate for women entrepreneurs in the EU is slowly improving. However, differences in the overall proportions still exist; that is, women-led start-ups are not funded on an equivalent basis to men-led start-ups, owing to structural inequalities3 in the population of entrepreneurs and investors as well as persistent biases.
Key findings
Promising trends…
Overall increase in VC funding for women-led companies in absolute and relative terms (volume and value); Europe is outperforming other regions
