Visit any tech event in Germany and expect to find yourself drowning in a sea of white, middle-class men. I worked from a coworking space for three years here in Berlin. An African-American friend used to joke to me whenever they held a social event,
"If you want to be in the photos, just stand next to me."
The hard reality is that while the tech sector shows no shortage of ideas, talent, or funding, not everyone enjoys the same experience.
Founderland is a non-profit organisation based in Germany focused on building a new inclusive, intersectional standard for female entrepreneurs and founders of colour.
It recently released a research report Rise & Thrive into the challenges experienced by female founders of colour in Germany.
As the authors assert
"Women of colour tend to report being over-mentored and under-funded - without funding, a great idea remains an idea."
It explores women's experiences and provides tangible resources that help create meaningful, lasting change. Let's take a look at what they've found out:
The stats don't lie
Unsurprisingly, the stats paint a dismal picture regarding diversity and inclusion:
- The State of European Tech report's 2020 Ethnicity Gap Data reveals that only 0.25% of VC funding went to Black-led startups, and only 38 Black founders received venture capital funding in the last ten years.
- In 2020 in Europe, only 800 women-founded startups received funding – barely 2% of the $300 billion in global capital funding.
- Only 1% of women-led startups and 0.7% of ethnic minority founders received VC funding in Europe in 2021.
- In 2021 only 0.02% of funds went to black women entrepreneurs in Europe.
The research looks beneath the figures to determine the cause of this, reviewing statistics and gaining an insight into the experiences of women of colour.
So why is this the case in Europe, especially in Germany?
Like attracts like
Theories around "Homophily networks" suggest that people with similar characteristics, such as gender or education, tend to consciously or unconsciously group themselves to create an environment of trust.
In investing, there is a preference to commit capital to founders of a similar background to the investors.
For example, according to the Deutscher Startup Monitor:
- 36.8 percent of founders met their co-founders in university.
- 34.5 percent were friends.
- 28.2 percent from a common previous employer.
- 23 percent met through a mutual connection.
In Germany, 52% of the unicorn co-founders studied at the same universities.
Being a migrant comes with specific challenges
In Germany, 1 in 5 founders has a migration background, with almost 60 percent being first-generation migrant founders.
This comes with its own challenges, such as language barriers, the visa process, residency permits, and social security.
There is also a major gap in funding in Germany based on migration background.
First-generation founders receive an average of € 1.1 million in funding – less than half of the national average of € 2.6 million reported by the German Startup Monitor.
Overreliance on single-dichotomy group
In Germany, diversity and inclusion initiatives typically focus on specific single cohorts like migrants or women. This fails to capture the experience of intersectional discrimination. For example, women can have different experiences if they are queer, parents, or culturally diverse.
Finding the right funders for your startup is tricky. Founders who are women of colour tend to be impact-driven, and research has shown that they create businesses that solve problems that they and their communities are confronted with.
However, when seeking funding, they are frequently told that their businesses are "too small" or "too niche."
How do you do warm introductions when you don't fit the mold?
Many investors will only deal with entrepreneurs introduced to them through a warm introduction. One Berlin founder shared her experience with the researchers:
"I was at an event where a VC shared that while they do accept online applications, they have never really funded an applicant. He shared that it's all about warm introductions, which infuriated me because I was like, 'to get a warm intro, you need to be a part of those circles, and being honest most circles are still white German men. I'm a Black queer working-class woman. I don't understand how I'm going to get into those circles and get warm introductions."
How do we fix it?
Investor teams need to be part of the change
Underpresentation also extends to who invests. In Europe, only 15 percent of general investment partners are women, and it was found that they have fewer seats on investment committees and less carry than their male counterparts.
Only about one in five people working in VC or private equity are people of colour..
Commit to actionable change
Founderland provides many resources for women of colour founders from organisations to join resources on addressing bias and prejudice in conversations with funders. I also recommend joining their speaker directory.
There's plenty investors can do, such as (un)conscious bias training to join Beacon — Founderland's Investor Collective.
They can also look at successful diversity initiatives such as Google's black founders' fund, VC Include, Gaingels, i3investing, and One Way Ventures as bench marks.
Don't just make it someone else's problem
However, it's important to acknowledge that the need for diversity-focused firms should not exist in the first place. All investment firms should prioritize diverse representation in their portfolios, to ensure that underrepresented founders have equal opportunities to succeed and are not relegated to a separate category.
By prioritizing diversity and inclusivity, we can level the playing field for all startups and foster a more equitable future.
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