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EU Parliament takes aim at lack of funding for female entrepreneurs

Men are much more likely to get money to found companies than women. More women are needed in the start-up world and there should be greater financial support to encourage this, say MEPs

Barbara Matera, Italian MEP
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The European Parliament wants more women to start their own businesses.

Currently, one third of the EU’s start-ups are created by women, according to a new study, which Barbara Matera, an Italian centre-right MEP and lead author on the report says is “unacceptably low.”

The numbers in part-time entrepreneurship really expose this gap, according to Matera. “Thirty per cent of female entrepreneurs work part-time, while only 12 per cent of men do,” she says.

One of the biggest problems identified in the study, published on Tuesday, is that women entrepreneurs do not get equivalent financial support to male counterparts.

Various studies show that female entrepreneurs start businesses with lower capital levels, opting for smaller loans and using their families for funding, rather than debt or equity finance from banks, angel investors, private equity or venture capital (VC).

One study last year by Startup DNA suggests male entrepreneurs are 86 per cent more likely to be VC funded and 59 per cent more likely to secure angel investment.

This week’s report does not uncover conclusive evidence that investors discriminate against women. However, Matera says, “Stereotypes about women’s and men’s abilities in the area of entrepreneurship may still influence stakeholders’ judgements about new businesses.”

There are other factors in play. “In our research for this report, we found that women are more likely to be risk-averse,” said Matera. There is also some evidence of a greater reticence among women about pitching projects to potential investors.

Natalie Campbell, co-founder of the consultancy, A Very Good Company, says she has heard anecdotal evidence of bias shown towards women from investors.

But she also makes the point that all the women entrepreneurs she knows are naturally prudent when it comes to growing and financing their companies. “Female-led businesses tend to grow more organically,” she said. “For women, it’s not about achieving an exit straight away. They don’t feel their companies have to go from 0-100 overnight.”

Matera suggests that the more female investors there are, the easier it will be for female entrepreneurs.  

Today in Europe, there are few women in the driving seat at VC firms and according to the European Business Angel Network only 4 per cent of angels in Europe are women.

“You hear a lot of horror stories around women in VC who've been victims of chauvinism,” said Lora Schellenberg, co-managing director of Girls in Tech London, a group which raises the visibility of women working in technology companies. “While I believe this happens, I think there are still a number of female investors paving the way and speaking positively about their experiences.” She cites Eileen Burbidge of Passion Capital who is also the British government’s special envoy for financial services technology.

The amount of female investment activity is slightly under-reported too, believes Campbell who says she knows a lot of women who like her, invest in companies, but do not see themselves as business angels.

Gender disparity

More women investors would be a good start but this is only part of the answer.

“The biggest obstacle is the simple issue of work and life balance,” said Schellenberg. “Women are still overall meant to be the primary caretaker, but it's tough to balance your company 'baby' with a real baby at home.”

Matera offers a similar view. “I think the single biggest change we could make would be to increase access to childcare and eldercare services, so that women who traditionally fulfil these roles have more time to work, create and invest,” she said.

The Italian MEP also called for more robust data on gender disparities. “Member states should collect [more] data on female participation in the business sector, and this alone will make them more conscious of the disparity in their country.”

“If they see there is this tremendous untapped potential, they will want to fix it,” she said.

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Related subjects: Entrepreneurship, Gender equality