Current figures clearly show that, compared to companies led by men, those led by women have had greater difficulty securing financing for years. It is particularly difficult for women to access capital when large sums are involved. Consequently, particularly in the area of corporate financing, there is clear discrimination against female entrepreneurs and founders due to “gender bias” in investment processes—that is, due to stereotypical thinking patterns that ultimately lead to identical business ideas being evaluated differently depending on whether they come from a woman or a man.
According to analyses by the #startupdiversity initiative, a number of factors play a role in this: For example, female founders are asked different questions by potential investors than male founders are. Men are usually given the opportunity to talk about their visions for the future, whereas women are more frequently asked to provide information about their current customer base and to present concrete financial projections. Furthermore, the composition of investor teams—which are often all-male—contributes to the disadvantage faced by female entrepreneurs and founders.
Furthermore, women often start businesses differently than men—with long-term growth goals or a corporate purpose oriented toward the common good—and thus frequently do not meet the criteria of venture capital firms (VCs), such as rapid growth.
To overcome “gender bias,” tangible changes are needed in venture capital, government funding, and access to traditional bank loans for female entrepreneurs. Improving access to capital for women-led startups and companies in the founding and growth phases can increase the number of female entrepreneurs and thereby foster greater diversity in entrepreneurship. Last but not least, this is also in the economic interest of primary banks, venture capital firms, and investors. This is because companies with women on their leadership teams and startups with women on their founding teams have been shown to be more successful in the long term than all-male teams.
The government has a special role to play as a role model in this regard, given its position as a public investor. The same applies to primary banks as intermediaries. There is an urgent need for a separate government fund for female founders and a quota for female founders in federal and state funding programs. The separate government fund could, for example, take the form of an evergreen fund with no fixed term and be specifically geared toward female founders by placing greater emphasis on long-term profitability and social value. Furthermore, a minimum quota of 30 percent for leadership positions in the investment teams of public venture capital firms is necessary so that public investors can live up to their role as role models.
An analysis of the commercial register by startupdetector shows just how wide the gap between men and women in the investment scene still is: The proportion of women in Germany stands at a mere 12.9 percent—there are 6,682 male business angels compared to just 864 female angel investors. A look at venture capital firms also reveals that Germany’s financial sector has a lot of catching up to do when it comes to gender parity. According to a study by the Boston Consulting Group, 96 percent of German venture capital firms are led exclusively by men. Among Germany’s top three venture capital firms, there is only one woman at the highest decision-making level. It is crucial to improve women’s access to such key positions.
It is encouraging that, for the first time, a federal government’s coalition agreement addresses the issue of women’s limited access to capital. It is a positive development that the “traffic light” coalition intends to take measures to ensure that women are more strongly represented on the investment committees of state-owned funds and investment companies and that access to venture capital for female founders is guaranteed. The key will be how they implement these measures and whether private investors will follow suit.
