A new study, ‘Women Founders in European Deep Tech Start-ups’ by the European Institute of Innovation and Technology (EIT), the European Investment Fund (EIF), and the European Investment Bank (EIB) Advisory Services, provides insights into the shortcomings that the European deep tech startup ecosystem faces regarding women in founding teams.
Gender bias in investment makes it crucial to support women-led start-ups at the early-stage. Those first investors are invaluable for founders, particularly for entrepreneurs developing solutions for major global challenges, where societal impact is as essential as commercial success.
However, with less than 25% of deep tech startups having a woman in the founding team, and the percentage of total funding going to deep tech startups with women founders standing at only 11.4% , the report illustrates the current gender finance gap in investments and the challenges that women founders face to access the adequate sources of funding to grow their businesses.
Women representation in deep tech start-ups
Women represent 50% of the population, however, the percentage of deep tech start-ups with at least one woman in the founding team remains below 25%, indicating that Europe is not taking advantage of the talent available in its population.
The report found that the percentage of deep tech start-ups with at least one woman in the founding team has been steadily growing from about 12% in the early 2010s, to 24% in 2022. The percentage of women founders as a total of all deep tech founders has also seen a steady increase from about 7% in 2011 to 14% in 2021 and 2022. The report also revealed that women were less likely to found solo deep tech start-ups.
The path of women founding deep tech start-ups is also diverse. Some transition from research roles, often encouraged by others, while others come from corporate jobs, spotting business opportunities through past experiences in innovation. Above all, they are motivated by a desire to create, solve problems, and make a difference in the world, with financial success seen as a bonus rather than the main goal.
Funding of women-led deep tech start-ups
46% of women-led deep tech start-ups tend to receive their first funding within the first year, outperforming women-led start-ups in other fields. However, the overall funding they receive is smaller, as are their funding rounds, and it is more likely to come from public sources.
The combination of these factors means that women deep tech startups have fewer resources to be able to be successful. Additionally, their valuation is also smaller, which means they must give away a larger percentage of ownership to be able to access similar resources. Finally, and unrelated to gender, the report finds that deep tech start-ups with larger founding teams and more patents receive more funding.
As women entrepreneurs of deep tech startups often rely on grants and bootstrapping to fund their ventures, with some turning to private investors for faster growth, funding remains a challenge with delays in grant disbursement causing issues. Women founders also often feel overlooked by venture capital firms, and while public support is helpful it tends to focus more on training than providing tangible resources.
Investors in women-led deep tech start-ups
Women deep tech startups are more likely to receive grants (16%) than seed funding (15%), early venture capital (VC) funding (13%), and late VC funding (11%). The average amount of money received in each round is larger for men-led start-ups except for early VC rounds where women deep tech start-ups receive an average of €12.23 million compared to €10.86 million, although it’s not significantly different.
Women founding teams also receive lower valuation over the various funding rounds and are less likely to reach a valuation of at least €20 million. Since the first funding round for women deep tech start-ups typically comes earlier and from public sources, the initial valuation is lower than that of men-led deep tech start-ups. Interestingly, this initial lower valuation propagates throughout the life of the startup into the rounds with private sources of funding.
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