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Far less capital per funding round is achieved by female-only teams in the Nordics, compared with male-only or mixed-gender businesses, according to a study by Unconventional Ventures and Dealroom.
As a general statistic, the numbers make bleak reading, but for a region that prides itself on social development and equality, the gender diversity report has reinvigorated a much-needed topic of discussion.
Marie Mostad, special adviser and investor at Unconventional Ventures, started working the investment firm last year because she shared its passion for leveling the investment playing field for startups set up by men and women.
“I thought the world had developed more and certainly that it would have done in the Nordics,” she said.
In the US, Mostad had seen some of the brightest female entrepreneurs being asked whether their male co-founders would be joining them in investor meetings, but she did not expect the same in Norway. “I was definitely under the impression that we’d be further along with gender equality in my home country, and among its startup ecosystem,” she said.
Mostad conceded that Norway’s startup scene is quite nascent, but said it is still a concern how the journey is being initiated so clearly on the wrong foot.
“As it’s a burgeoning ecosystem, there’s not a lot of capital being invested, which means there is more competition among startups for investors,” she said. “This is the opposite of the US, where investors are fighting for startups.
“It leads to a situation where entrepreneurs have no position of power to be demanding about issues like diversity, or even to be choosy about who they are answerable to from an investment perspective. Already on the back foot, female entrepreneurs have such limited opportunities as a result.”
This lack of variety or choice informs a lot of the prejudices and inequalities highlighted in Unconventional Ventures’ report – and it’s certainly not an issue exclusive to Norway.
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“We’re not worst in class as a country, but it’s certainly not a positive set of results for Norway or the region,” said Mostad. “What is most mind-blowing to me, though, is the opportunity being missed by investors.
“It has been proven that diversity will always outperform male-only teams. So, as an investor, even if you’re not interested in diversity – which would be bad enough – surely you’re still interested in making money?”
Despite this, the recurring experience echoed by numerous female entrepreneurs when pitching to investors is one of negativity, hesitance and, ultimately, “prevention”.
Maria Ljungberg, CEO of Propel Capital, the investment arm of Nordic incubator Sting, said: “As per the academic paper entitled We ask men to win and women not to lose, researchers have found that within the context of investor meetings, women tend to be asked prevention-focused questions, which create uncertainty, while men are asked promotion-focused questions, which focus on opportunity. This phenomenon contributes to men receiving more funding than women.”
Ingrid Sundqvist, founder and CEO of equestrian app Ridely (known in its native Sweden as Ztable), has experienced this situation first-hand. “I have been in lots of meetings where I am asked about risk instead of opportunity,” she said. “This tends to happen more often to female founders, and a risk-oriented conversation can lead to less funding.
“This, according to research, is a bias that investors are not aware of. The more we talk about this, the more awareness we can raise in order to chip away at the phenomenon.”
Missing out on innovation
Mostad agreed that the bias is unconscious in most cases, but if anything, this makes it harder to overcome. Commanding and legislating for equality is one thing, but changing an ingrained leaning requires more organic evolution.
However, a positive sign in this striving for progression could be the region’s concerted push for overall startup success. The Nordics are renowned for innovating in niche spaces, but this prospect will be slowed or hindered if only half the entrepreneur population is being considered by investors or pushed forward with positivity.
“If we want to continue to create new products and services for the entire population, then the entire population – founders of all genders, colours and backgrounds – needs to be behind them,” said Mostad. “At the moment, massive industries with sub-sectors and niche applications, such as in femtech, are being under-explored because, more often than not, they are being run by female entrepreneurs.
“There is just so much innovation, and value, being missed out on because of this.”
Ljungberg added: “Women are more likely than men to run startups that offer lifestyle solutions, for instance. In the same way that they may be missed out on by male investors, there also aren’t enough female investors in the region to counter the loss. This will slowly change, however, as the number of female investors increases, as is being seen in Stockholm.”
Part of the solution
The general consensus is that, as Nordic startup ecosystems continue to expand and evolve, so too will the sheer extent of investors and investment opportunities. From there, with more variety and with entrepreneurs approaching funding from more of a position of strength, the cycle will, hopefully, be broken.
In Sweden’s slightly more advanced ecosystem, Ljungberg is already seeing this come to fruition. “There are a number of initiatives that provide women with financing advice and access to investors, such as Femtech Bootcamp, Nordic Female Investor Meetup, and our own Sting Female Open Coaching,” she said. “These provide women with an advantage designed to balance out the structural gender biases in the industry.”
But this does not account for everyone. For those who still have to seek traditional routes to investment, the overwhelming hope is that reports such as Unconventional Ventures’ will now trigger a trend among investors in the region where unconscious biases transform into a conscious effort to change things.
Mostad added: “I hope the world will become colour- and gender-blind in the future, but until then, we need to keep using labels, to highlight the success cases, and to talk about the biases even more. There is a misinterpretation that under-represented groups of people are a charity when it comes to funding, which is mind-blowing when diversity should actually be seen as a business and financial opportunity.
“As an entrepreneur, and now an investor, I want to be part of the solution and that goes hand-in-hand with talking about the issue. In the coming years, I expect reports to come back with more favourable numbers, but we should be eager and impatient in the meantime.”