"Usually it's men who run these big monster companies, and women's companies are much smaller - it's like an unwritten tech-industry stigma." That's how Whitney Wolfe Herd, CEO and founder of Bumble, sums up the rules of the startup scene. The founder of the digital dating platform, where women make the first step, is herself one of the few exceptions - across the board. As a woman, Whitney Wolfe Herd managed to start a company, raise funds and take it public. Today, Bumble has a market value of around seven billion US dollars. A success story that only a few women can write.
2021 was a record year for start-ups in Switzerland: for the first time number of startups exceed the 50,000 mark, with 50,545 new companies entered into the commercial register. But only around 0.8 percent of those companies – i.e. 300 to 400 – are start-ups. A startup, by definition, is characterized by its founders pursuing an innovative business idea with high growth potential, often in the fields of information and communication technology, fintech, biotech, or medtech.
Investors distributed the risk capital for start-ups more generously last year than ever before. According to the Swiss Venture Capital Report 2022, around 3 billion francs flowed into young companies. This corresponds to an increase of 44 percent compared to 2020.
No woman in the top ten
So far, so good. But the distribution of this capital is less encouraging. In 2021, most financial resources went to young companies that are founded and managed by men. The top ten startups that, according to the Venture Capital Report, last year received the most venture capital in Switzerland don't have women in their founding team or in their leadership. Among the startups in places 11 to 20, only one woman is a member of a founding team. She is also the CEO. These 20 start-ups received 63 percent of the venture capital investments made in Switzerland, i.e. around CHF 1.9 billion.
The fact remains: women are not in a place where they could change the world with ideas and a lot of money. Even exceptions like Bumble CEO Whitney Wolfe Herd cannot hide this.
Female entrepreneurs receive only three percent of the venture capital
According to the EU Start-up Monitor, only 20 percent of startup founders in Switzerland are women. This is a big gap because if we look at Swiss numbers outside of the startup sector, the proportion of female founders is significantly higher - at almost 38 percent.
The trend in Switzerland is reflected worldwide. Globally, the proportion of female startup founders is only 14 percent, in the USA it is 28 percent, and in Europe, it is 16 percent. In the latter, most female businesses are started in Poland and Hungary (24 percent each), and the least businesses are started in Portugal (only 5 percent).
The gender gap becomes even clearer when we look at the distribution of funds. According to Crunchbase, all-female founding teams receive only 3 percent of the capital worldwide. Mixed teams get 9 percent. 88 percent of venture capital for start-ups goes to men's teams. It makes no sense because studies show that women do business better and more profitably than their male colleagues. For every $100 invested in them, women make $78 in sales, while men only make $31. Start-ups by women also have a higher survival rate.
The fight against prejudice
From this perspective, the startup scene is a gentlemen's club. The reasons for that are complex. For one thing, women are still underrepresented in STEM subjects where a significant proportion of innovation projects are based. On the other hand, profit maximization for female entrepreneurs - in contrast to investors - is often not the top priority, nor is rapid growth. Many female startups are founded out of necessity and aim for long-term, stable growth. Women also lack networks.
Finally, a key point that makes life difficult for female entrepreneurs: they have to fight against a lot of prejudice on their way to founding a company. “Women have to overcome a number of obstacles on their way to the top. Women in the start-up scene especially have to struggle with different prejudices and stereotypes," says Natalie Suess, co-initiator of the Female Founder Initiative.
This gender bias is particularly evident in the search for financial means. Investors often see women as less competent and less willing to take risks and less performance- and profit-oriented than men. In pitch situations, women have to prove their skills more. While men are given the opportunity to talk about the potential of their idea in this context, women have to comment on possible losses or negative scenarios. As the Female Founders Monitor shows, financiers also find young entrepreneurs who lean out the window courageous and willing to take risks. If young women entrepreneurs do the same, they label them as naïve or ill-informed.
Men prefer to invest in men
It is much more difficult for women entrepreneurs to get venture capital for their startups because the majority of investors are men. The principle "Like attracts like" applies here. Men invest more often and preferably in other men than in women. A study by the Lucerne University of Applied Sciences and Arts, which deals with the topic of financing female founders, explains that similarity bias is the main reason for this: you tend to trust someone who is the most similar to you. In the minds of many, success is still a male domain. It pays off for men that they often act more confidently than women in competitive situations. However, this is not because they are actually more competent, but because they tend to overestimate their skills, know-how, and expertise.
It is much more difficult for women entrepreneurs to get venture capital for their startups because the majority of investors are men. The principle "Like attracts like" applies here. Men invest more often and preferably in other men than in women.
And then there is an additional hurdle for women: According to the same study, investors are less interested in “female ideas”. Some of them simply rate innovations by women – especially in the field of femtech – as less important. A strange underestimate. After all, women's health issues affect half of the population.
Targeted support and measures are required
The fact that money in the startup scene mainly flows from man to man is not only unfair for female founders - it is also a missed opportunity for society. Women's ideas receive hardly any money or growth opportunities. Feminine products and businesses remain small and have little impact. The consequences? Worse products and platforms, and ultimately, worse profits for at least half of the population. That's because women pay significantly more attention to the needs of children, the elderly, and to sustainability issues. Imagine the impact if female startups received more funding.
Investors too miss out on many opportunities according to Isabelle Siegrist. The CEO and founder of Sandborn coaches startups, brings together founders and investors, and invests herself. "Women's business ideas are a huge investment area that should be better exploited. There's an untapped potential." Isabelle Siegrist specifically supports women-led startups. Concrete measures are needed to create change. The entrepreneur has defined these into a four-point action plan. First: a targeted search by investors for companies run by women. Second: greater diversity in the founding teams. Third: an increase in deal flows – i.e. the proposals made to investors. Fourth: The review of decision-making processes on the investor side with regard to gender neutrality. "There needs to be systematic support for female founders so that the startup ecosystem becomes more diverse," emphasizes Siegrist.
Startup world is slowly on the move
The ecosystem is, in fact, on the move. Various organizations have paid attention to the gender startup gap. “We are noticing a slight trend. More and more organizations are promoting women and are specifically looking for ideas from women,” says Natalie Suess. Matthias Filser, Head, Startup Campus Consortium, adds that there is also increasing support aimed at female founders.
Innosuisse, the Swiss agency for the promotion of innovation, reaches a similar conclusion. In 2021, 5500 women took part in their startup training, a 46% ratio to men. “In 2020 it was still 43 percent. Before that, even less,” says Lukas Krienbühl, Co-Head of Communications at Innosuisse.
Make role models visible
According to Krienbühl, this increase was mainly due to awareness-raising measures. "Innosuisse attaches great importance to the fact that women and men are appropriately represented among employees, startup coaches, and at the Innovation Council." Krienbühl emphasizes that female coaches and mentors are recruited in a targeted manner, also in order to act as role models. The Female Founder Map also takes up the topic of role models. The map includes around 350 entries from women-led companies. “We want to make female entrepreneurs visible. There should be no more excuses when female speakers are needed for events. The Female Founder Map is also intended to show relevant people and contacts at a glance for journalists and investors,” explains Natalie Suess.
“We want to make female entrepreneurs visible. There should be no more excuses when female speakers are needed for events. The Female Founder Map is also intended to show relevant people and contacts at a glance for journalists and investors”
There are no large-scale initiatives
The lack of female founders is becoming more and more evident. However, progress to address the problem is slow. There are no coordinated initiatives with clear demands and measurable goals in Switzerland. Innosuisse's funding instruments contain neither quotas for women nor specific offers exclusively for women. And at the political level, too, the topic has so far been sought in vain. The National Councilors: Judith Bellaiche (GLP) and Andri Silberschmid (FDP) founded the parliamentary group "Start-ups and Entrepreneurship" with the aim, among other things, of improving the framework conditions for start-ups. However, the explicit promotion of women has not yet been a priority, as Bellaiche says when asked.
A look across the border shows that there is another way. For example, Norway has introduced a quota to ensure that female entrepreneurs receive a fair share of funding. In Germany, the Federal Association of German Startups and the digital association Bitkom launched a diversity initiative in spring 2021. It is supported by numerous founders and well-known venture capitalists. The initiators demand more transparency in the venture capital funds with regard to the proportion of women in the investment team and in the portfolios, the establishment of a fund for the long-term financing of companies run by women, and quotas for women for certain scholarships.