By Christian Krys

Startups are important drivers of growth and employment. They create new business models, attract highly motivated talents and are at the core of an innovation-driven economy. Like in established companies, the topic of gender diversity is of growing interest in startups as well. A new study, compiled by the Chair for Strategy and Organization at the Technical University of Munich on behalf of the Roland Berger Foundation for European Management, seeks to examine the gender diversity in German and French startups.

The founding landscape is male dominated

The study analyzes data from Dealroom and LinkedIn and reveals sobering results. 91% of founders and 82% of founding teams in Germany and France are male and this is more or less identical in both countries: Looking separately at the gender distribution of founders in Germany and in France, the results show that all-male founding teams or solo male founders account for more than 80% of all startups (figure 1).

Most important technologies are neglected by women

Technology plays an important role in many startups. Therefore, the study analyzes which technologies German and French startups use and link the results to the gender distribution of founders. Figure 2 shows the technologies used in German and French startups. In both countries, deep tech, artificial intelligence and machine learning are the most important technologies used in startups.

Figure 3 shows the gender distribution of founders by technology. In Germany, female tech founders are mainly represented in startups using virtual reality, natural language processing, deep learning and blockchain. In France, female tech founders prefer startups using nanotech, mobile app, blockchain and hardware. In both countries, the technologies around most startups are founded – deep tech, AI and machine learning – are largely neglected by woman: Only up to 7% of such startups are founded by women.

Female founded startups lack of financing

For startups not only an innovative technology is essential – they also need financing to grow and establish their business model in the market. Therefore, the study analyzes whether the gender distribution of founders is related to the valuation of a startup. Figure 4 shows that for German startups the highest median startup valuation is for all-male (USD 21 mio.) and diverse (USD 20 mio.) founding teams. Startups by solo male founders, at USD 11 mio., are valued at only half that of startups by male and diverse founding teams. Startups by solo female founders (USD 8 mio.) and all-female founding teams (USD 6 mio.) achieve the lowest median valuations. In France, startups by all-male founding teams also achieve the highest valuation, at USD 14 mio., followed by startups by diverse founding teams, at USD 10 mio., and solo male founders, at USD 8 mio. As in Germany, French startups by solo female founders, at USD 5 mio., and by female founding teams, at USD 4 mio., achieve the lowest median valuation.

The lower valuation of female founded startups corresponds to their smaller size – a reciprocal interdependency as startups need financing to grow and smaller startups receive less money than bigger ones. Combined results of German and French startups reveal that on average, diverse founding teams have the most employees, with 81 employees, followed by all-male founding teams, with 62 employees, and solo male founders, with 47 employees. Solo female founders and all-female founding teams have the least employees, with 36 and 27 employees, respectively.

Breaking the gender bias and filling the STEM pipeline with women

Overall, the study reveals a significant gender gap regarding the share of female founders, the use of the most important technologies and the valuation of startups. What should be done? The study underlines two most important actions:

• First, the gender bias – stereotypes that the skills and behavior of women do not fit with the needs of startups – needs to be broken. It is necessary to establish equal and inclusive processes and structures in the startup and investment process. Female role models can inspire and motivate other women. Gender-neutral startup programs, incubators, accelerators, and investment processes are a prerequisite to have more female founders. The venture capital industry has to become more diverse, too.
• Second, the STEM pipeline has to be filled up with women: We need more women in science, technology, engineering and mathematics. This starts with education in kindergarten and needs dedicated programs in schools and universities as well as the engagement of companies and research institutions for more gender diversity in STEM fields.

There is still a long way to go to reach gender diversity in startups and the entire ecosystem. But the effort will pay off and transform one of the most innovative parts of the economy to the next level.

About the Roland Berger Foundation for European Management:
The Roland Berger Foundation for European Management promotes science in the field of national and international management.

About Technical University of Munich:
The Technical University of Munich (TUM) is one of Europe’s top universities. It is committed to excellence in research and teaching, interdisciplinary education and the active promotion of promising young scientists. The university also forges strong links with companies and scientific institutions across the world.