Sifted - The gender gap

Good morning there,

There’s not often reason for optimism when it comes to gender diversity in European tech, but there’s a smidgen of good news in a new PitchBook report on how female founders and investors fared in 2023. I dig into that below.

Elsewhere today, we look at what UK chancellor Jeremy Hunt has promised founders in the government’s spring budget and how startups can ensure they’re complying with the EU AI Act.

Plus, a reminder to all founders that tomorrow is the last day to apply for Sifted’s inaugural leaderboard of the fastest-growing startups across the UK & Ireland. Reckon your team should be on there? Send your application here.

— Sadia Nowshin, editorial assistant

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The gender gap 

Whatever your thoughts on International Women’s Day, this week feels as good a time as any for a state of the union on how gender diversity is faring across European tech. And while a lot of the data points are bleak, a new report by PitchBook contains a tiny bit of good news.

We’ll start with the not-so-good. Overall fundraising remains dire, with all-female founding teams in Europe combined surpassing the €1bn mark for funding in a single calendar year just once, in 2021. By comparison, all-male founding teams in Europe have raised more than €10bn in funding every year since 2015.

The thread of good news within that data is that female-founded teams with at least one woman cofounder are growing their share of the overall funding pot — albeit slowly. In 2023, those teams grabbed 20.5% of the total deal value in Europe, a 5% increase on 2022 and the highest it’s been since PitchBook started gathering data in 2010. 

On the VC side, there’s less to shout about.

PitchBook’s report found that at firms with at least €50m under management, just 15% of decision makers — that’s partners, principles and managing directors — were women. Of those firms, 92% had more men than women in those positions. While we’re on this topic, remember that Morningstar research from 2019 that revealed in the UK there were more VC funds run by men called David than women?

That’s a bad thing for obvious reasons. The logic would go that the more women there are in decision-making positions at VC firms, the more likely female founders will have a better time of it. And at the moment, they have to deal with a lot — like VCs asking them sexist questions at pitch meetings, for example, and struggling to raise bigger rounds at later stages. Even in the female-focused femtech sector, it still pays to be a man.  

A lot of women in VC are tired of the status quo, and last year we reported that dozens were quitting the industry. While some of them said they wanted to build operational experience or start their own funds, others told Sifted that they were fed up with the male-dominated element of VC and were unlikely to be returning to the industry anytime soon. 

In other corners of the investment world, PitchBook’s report suggests things aren’t that much better. The number of European female angel investors participating in at least one deal doubled in 2021, compared to 2020. That figure stayed stable in 2022 — but last year declined by 42%.

There was a small bit of good news that came out of the UK yesterday related to this. In his Spring Budget, UK chancellor Jeremy Hunt reversed controversial changes to the angel investment threshold that critics said would reduce the diversity of people, particularly women, eligible to angel invest. The minimum annual income threshold for someone to qualify as a high-net-worth angel investor was brought back down to £100k, from £170k.

“The change would have disproportionately impacted female angel investors who are more likely to back female founders. So, the knock-on effect was going to be that female founders, who already face significant challenges, would find it even harder to secure investment,” says Dalia Aga-Shaw, founder and managing partner at VC firm 3SV. 

Angel investor and founder of community group Female Founders Rise, Emmie Faust, hopes the reversal will bring more women to the profession and encourage more investment to flow into female-founded startups. 

“We want to see more female angels, more women in power, more women on boards and more female founders getting funded,” she says. “Therefore we need to see support from the government in doing this, not legislation that will negatively impact underrepresented angel investors.” 

That said, all the chancellor has done is reverse those changes. Under the current threshold, in 2022, just 14% of the UK’s angel investors were women — and for real change to happen more needs to proactively be done to make it easier for more women and underrepresented groups to access investments at the super early stage.

You can read my breakdown of the rest of the data here.

Plus, VCs and founders, I want to hear from you. Is Europe’s ecosystem getting any better for female founders, or investors? What would bring about significant change? And should some of that sit with governments? What do you think they could be doing more of? Email me your thoughts.

— Sadia Nowshin, editorial assistant

🤷‍♀️ Only one in five founders in Spain are women, according to data shared by the Women Angels for STEAM (WA4STEAM) association during a roundtable event in Madrid. The group represents 180 female business angels and has invested about €3m in 30 startups since 2018, of which half are in the life sciences. 

• Female angel investors in Spain are on the rise, but they have fewer years of experience investing than men and pump in smaller amounts per ticket — just €16k on average. In comparison, their male peers invested €40k according to Laura Caballero, associate director of the Entrepreneurship and Innovation Center at the IESE Business School in Madrid. 
• That partly explains why women are also more likely to invest as part of networks or crowdfunding platforms, says Marta Huidobro, president of the Spanish Association of Business Angels. At the event, she called for tax incentives for multiple small investments through these types of entities similar to Germany and Italy.

💼 The UK’s budget delivered on Wednesday signalled an intention to boost investment in startups — but was short of fresh cash.

• The Treasury reinstated the annual income threshold of £100k used to define high-net-worth individuals, which it had raised controversially to £170k on January 31. The change to the Financial Promotions Act had triggered an outcry among angel investors, who feared the higher threshold would hugely reduce the number of women, in particular, who could back startups. Sarah King, founder and CEO of angel investment platform Obu, says the U-turn shows “the strength of voice that people who are overlooked and underestimated in the investment ecosystem can galvanise when legislation is implemented without thorough analysis of its impact.”
• In an attempt to boost the pipeline of future IPOs in the UK, chancellor Jeremy Hunt also launched a consultation on the Private Intermittent Securities and Capital Exchange System (PISCES), which is designed to act as a crossover between public and private markets. The secondaries marketplace would give shareholders — like founders, VCs and angels — the opportunity to sell stakes in companies before they’ve gone public regularly. It’s expected to go live later this year — and could be the kind of solution the ecosystem, thirsty for liquidity, desperately needs.
• The Alan Turing Institute, Britain’s national centre for AI and data science, will see its funding doubled to £100m, to be spent over the next five years. The extra cash will fund research on the application of AI to healthcare, environmental protection, as well as defence and national security. And a new £7.4m upskilling fund pilot scheme will help startups develop AI skills.

♻️ Sweden’s Harald Mix — the man behind climate giants H2 Green Steel and Northvolt —  has launched a new garment recycling startup via his investment company Vargas, together with the fashion giant H&M. Syre (previously known as HMVX) is focused on textile-to-textile recycling, and will establish multiple production plants producing circular polyester across the globe.

• Before the launch, the company raised around €10m from the two backers and secured an agreement with H&M worth $600m over seven years. 

😬 French unicorn Payfit, which sells automated HR and payroll services to small businesses, is planning to let go of 110 employees (14% of its workforce), largely in customer services. The story was first reported by French outfit Les Echos and Payfit later confirmed the news to Sifted. 

• It comes just a year after a first wave of layoffs, which saw Payfit slash its 1,000-strong workforce by 20% — and means the company has just under 700 employees.
• The company says that it has reduced losses by half over the past year — but that the latest move is necessary if Payfit is to reach profitability by 2026.

👩‍⚖️ Everything you need to know to prepare for the EU’s AI Act.

💻 How to make the most out of hybrid events. (Sponsored by Zoom)

Paris-based Bene Bono, a platform to help organic farmers and producers sell produce rejected by major supermarkets for aesthetic reasons, raised €10m in funding. AXA Venture Partners led the round and was joined by investors including 2050, Stride VC and Project A.

London-based Fluent, an AI-powered data analyst, raised €6.8m in seed funding. Hoxton Ventures and Tiferes Ventures co-led the round.

Cambridge, UK-based Theia Insights, an AI-powered platform for investment analysis, raised $6.5m in funding. Unusual Ventures led the round and was joined by investors including Fidelity International Strategic Ventures and Clocktower Ventures.

Zurich, Switzerland-based Cultivated Biosciences, which makes a dairy-free cream alternative, raised €4.6m in seed funding. Navus Ventures led the round and was joined by investors including Founderful, HackCapital, Joyful VC, Mandi Ventures and Zürcher Kantonalbank.

London-based Agio Ratings, which helps firms with digital asset exposure to manage risk, raised $4.6m in pre-seed funding. Superscrypt led the round and was joined by investors including Portage and MS&AD Ventures.

Munich-based phelas, which develops electric storage solutions, raised €4.1m in seed funding. E44 Ventures led the round and was joined by investors including Axon Partners Group, Deutsche Telekom and BNV Partners.

London-based Cogna, which uses AI to provide custom software development for customers, raised £3.76m in funding. Hoxton Ventures led the round and was joined by investors including Notion Capital and Octopus Ventures, and angels including Hermann Hauser. 

Aarhus, Denmark-based SynergyXR, which helps enterprises to make their own corporate metaverse with a no-code platform, raised €2m in funding. Kvanted led the round and was joined by investors including EIFO, Innovestor, North-East Ventures and AURA Ventures.

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