Gender investment gap: less capital for female startup founders

• 237 women and 1,713 men received fresh capital for their start-ups in 2023
• 5 per cent of all start-ups that received venture capital in 2023 had all-female founding teams – but they only received 2 per cent of the capital
• Female founders are most strongly represented in the healthcare sector (24 per cent)
• The larger the financing rounds of start-ups, the smaller the proportion of female founders

The “gender pay gap” also applies to Germany’s female founders: Last year, start-ups that were set up by a team consisting exclusively of women only received a fraction of the amount that went to start-ups with all-male founding teams. Specifically: 102 million euros went to start-ups with an all-female founding team – that is two per cent of the total venture capital invested. Conversely, start-ups founded by men only received 87 per cent of the capital, which equates to 4.9 billion euros. The remainder – 608 million euros – went to start-ups in which both men and women form the founding team.

This discrepancy becomes particularly clear when looking at the diversity within the start-up founding teams in relation to the size of the financing rounds: For example, the proportion of women among all startups that received new capital last year was 12.2 per cent. In contrast, the proportion of women in the founding teams of start-ups that received financing of at least 50 million euros was only 1.8 per cent. The analysis shows: The larger the financing rounds, the smaller the proportion of women.

In total, the founding teams of startups that recorded at least one financing round in Germany in 2023 comprised 1,950 people – 237 of whom were women. A comparison of the federal states shows that women are the most strongly represented in the founding teams of Berlin startups throughout Germany: A total of 265 Berlin companies in which the founding members are known received fresh capital last year – their founding teams had a 17 per cent share of women. In comparison: in Bavaria, the proportion is only 12 per cent, in North Rhine-Westphalia 13 per cent and in Baden-Württemberg 12 per cent.

This is shown by the Startup Barometer of the auditing and consulting firm EY (Ernst & Young), which focuses on female founders. Companies that are less than ten years old are generally categorised as start-ups. Companies for which the composition of the founding team could not be researched were not included in the analysis.

Dr. Thomas Prüver, Partner at EY: “We see a massive ‘gender investment gap’ in startup financing in Germany.” The reasons for this are varied and complex: “On the one hand, women continue to face greater challenges in the business world than men. Traditional role models will still play a role in 2024.”

Prüver: “Diversity promotes innovation and creativity”

Prüver counters: “Start-ups are an essential driver of innovation for the economy. Especially when it comes to new impulses, ideas and approaches, diversity is a key to scoring points on the market. Diversity promotes innovation and creativity and leads to a rich pool of ideas. If, in a male-dominated business world, male-dominated investors prefer to invest in start-ups from male founders, something is fundamentally wrong.”

However, it is also a fact that the proportion of female startup founders has risen steadily over the past ten years. Although this is still a weak trend, it is a positive one that will hopefully strengthen, says Prüver: “The more examples there are of successful female founders, the more ambitious young female entrepreneurs will follow them – and thus further strengthen the startup ecosystem, which is currently undergoing radical change anyway.”

Another reason for the gender investment gap is the recognisably different sector focus of female and male founders. For example, the proportion of female founders in four of the five top sectors by financing volume in 2023 is below average – and in some cases significantly so. While the proportion of women in Software&Analytics is still ten per cent, it is just two per cent in the Energy sector. In the Mobility, Media&Entertainment and FinTech sectors, it is six per cent each.

Healthcare sector with the highest proportion of female founders

In contrast, female founders are most strongly represented in the healthcare sector, where almost one in four founders (24 per cent) is female. The proportion of women is also above average in the recruitment (20 per cent), AdTech (18 per cent) and e-commerce (17 per cent) sectors. Prüver: “In general, start-ups based on expertise from the STEM sector receive significantly more capital than other young companies. This is particularly evident in technology start-ups, which are currently raising an above-average amount of capital. And it is precisely here that women are clearly underrepresented in the founding teams.”

This is probably also due to the fact that women are much less likely to opt for a STEM subject when choosing a degree programme. However, two out of three students in the subjects of maths, computer science, natural sciences and technology are still men. However, according to the Federal Statistical Office, the number of female students has more than doubled over the past 20 years – even if there has been a slight decline recently. Generally speaking, this is nevertheless an important signal, says Prüver, because: “I firmly believe that the number of female founders in STEM sectors will continue to rise – and that the ‘gender investment gap’ will gradually close as a result.”