Startup companies are a central factor of economic renewal in times of digitalization: With their innovative products, female and male founders change existing industries and create completely new markets. The German startup industry is still strongly male-dominated. This year’s Female Founders Monitor shows that women are still heavily underrepresented in the startup world – the proportion of female founders in Germany is currently just under 15.7%. In the previous year, the rate was 15.1 percent. A clear majority of startups are built by male teams, and especially in the tech sector, such as software applications, there are hardly any women-led companies. Also, male founding teams are more focused on growth and scalability, more clearly oriented toward external investors, and much more successful in obtaining high amounts of financing. For women, on the other hand, there are high barriers to entry in the startup sector, which can be countered and enormous potential exploited in particular by strengthening diverse teams. Women’s teams are by far the most common in the healthcare sector. Given their high level of expertise in the natural sciences, female founders are a fundamental driver of medical innovations. In contrast to this study, women are generally more confident about taking the step of “starting their own business”. After all, the female sex is strongly represented in general business start-ups, but the figures in the start-up world are simply disappointing. But what is the reason that women so rarely gain a foothold in the German start-up world? What challenges do female founders face in this country?
What is the Female Founders Monitor (FFM)?
The Female Founders Monitor (FFM) by the Bundesverband Deutsche Startups e. V. in cooperation with Google for Startups provides a detailed overview of the situation of female startups in Germany. For three years, the FFM has been examining the German startup landscape in its breadth about gender-specific characteristics. The study draws on the proven research design and at the same time always sets new focal points: Last year, among other things, the special importance of balancing family and career for female startup founders was elaborated. The current study focuses on the areas of financing and networking – topics that play a central role concerning the challenges faced by female founders.
What are the goals of FFM?
The goal of the Female Founders Monitor is to support female startup founders in Germany and in this way promote the openness, diversity, and competitiveness of the startup ecosystem. Based on facts and figures, the FFM raises awareness of the conditions of female startup founders, identifies current challenges, and thus makes an important contribution to the process of social change. Based on facts and figures, the study aims to raise awareness of the topic, clearly names current challenges, and thus makes a contribution to the process of social change.
Why does only one gender dominate the start-up industry?
What distinguishes both female founders and male founders in the start-up scene is their high level of education. Both genders have usually completed a degree before founding a company. They have a business, technical and digital know-how – all important success factors for innovation and growth. What they often differ in, however, is their choice of subjects. Women often choose to study humanities or social sciences. They are also strongly represented in the natural sciences. However, the situation is quite different in computer science, mathematics, or engineering. Here, female graduates are rather rare. In economics, the balance is once again even. There is not only an imbalance in the subjects studied but also in the forms of financing. Those who want to grow quickly with their company like to fall back on investments from business angels or venture capital funds. However, it has been shown that these forms of financing have so far mainly benefited men: 1.6 percent of women’s teams and 17.6 percent of men’s teams state that they have received VC financing to date. The imbalance is also evident in the amount of funding female founders have received to date: Only 5.2 percent of women’s teams have already raised one million euros or more – compared to 27.8 percent of men’s teams.
What is the gender distribution within a startup?
The management level of 20.1% of startups has a mixed composition. The enormously high proportion of male teams points to clear barriers to entry for women in the startup industry and also generally prevents the tech scene from gaining diversity. This is because, as studies show, the gender structure in the founding team also continues at the employee level: statistically, even one woman in the founding team of a startup ensures that more than twice as many women are hired. Despite the underrepresentation of women in mixed teams, diversity is a key factor in empowering women in the startup sector, because it is here that they leap into the tech scene.
Where are the potentials and difficulties?
Differences can also be seen in the motives for founding a company and the approach is taken. Female founders often pursue social problems and are particularly represented in the green economy, social entrepreneurship, and the healthcare sector. Male founders, on the other hand, are more focused on growth and scalability. They dominate the start-up scene in the tech sector. These differences also have an impact on funding. A “gender bias” is evident here. Women receive significantly lower sums and funding from business angels and venture capital funds. One reason for this is often the lack of contact with financially strong investors. Yet women certainly have potential. Their presence in the healthcare sector is particularly noteworthy. Almost 17 percent of women-led startups fall into this sector. Medicine is thus a best-practice example for strengthening female founders in the mathematics, information technology, natural sciences, engineering, and technology sector. One of the biggest obstacles is still the compatibility of family and professional life. The majority of female founders are between 30 and 40 years old when they start their business. The time of founding a company thus falls during the family planning phase. The FFM shows that the majority of childcare responsibilities in the start-up sector also fall to women. This double burden prevents many women from founding and advancing their own companies. Women founders would like to see more support from policymakers on this issue.
What are the opportunities and outlook for women in startups?
The FFM shows a clear imbalance in the distribution of female and male founders. For example, several initiatives are working to close the gap in the tech sector. However, the biggest obstacles for women are balancing job and family, lack of networks in the established economy, and disadvantage when it comes to capital. Female teams usually fail to attract financially strong investors for their company. A professional business plan could help here.
In many cases, startup consulting or startup coaching can help identify difficulties and potential barriers early on and address them strategically. Promoting diversity in start-up teams is thus one of the central tasks of the coming years. This is particularly true because mixed teams achieve better results and diversity also pays off in terms of economic success.