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European VCs with higher female representation outperform men-only teams, study finds  

Published: 15 September 2023

According to the European Woman in VC’s survey, only 9% of assets under management are managed by female fund managers, despite the correlation between gender diversity and superior performance.

Despite the relatively higher returns, female general partners (GPs) are few and far between | Kotoffei on iStock

European Women in VC (EWVC), a community of more than 1000 senior female venture capital investors, has released its third annual report looking at the state of the European venture capital market from a gender perspective. 

The study revealed that management teams of VCs mostly composed of women outperformed men-only teams by 9.3 percentage points. 

The findings were based on a survey of 104 European-headquartered VC firms representing 220 funds with combined assets under management (AUM) of nearly €12bn, as well as a PitchBook data sample of 558 European-headquartered VC firms with a combined AUM of €148bn.

The study also found that on average, each 10 percentage point increase in the representation of women in senior management teams is associated with a 1.3 percentage point increase in the internal rate of return (IRR).  

Despite the relatively higher returns, female general partners (GPs) are few and far between.  

The study highlighted that in 2023 only 16% of GPs are women, compared to 15% in 2022, and that just 9% of total AUM in Europe is managed by female GPs, a figure which has remained static since last year’s report. This lower ‘firepower’ is, in part, attributable to relatively fewer female GPs holding positions at larger VCs. 

Nevertheless, senior female representation is expected to increase with 47% of respondents overall expecting the number of female GPs in their companies to grow over the next five years, and 14% forecasting ‘significant growth’. 

Kinga Stanislawska, founder of European Women in VC, said: “This report serves as a crucial stepping stone toward a more inclusive and prosperous future for the European venture capital industry. While progress is being made, we must collectively acknowledge that change takes time. The correlation between gender diversity and superior performance is a powerful motivator for the industry to adapt to the evolving landscape.” 

Unconscious bias 

The report attributes the superior performance of women-led teams to being “exceptionally qualified for their roles, given the difficulties of being hired in the first place” as well as their willingness “to invest in companies headed by other women, seeing opportunities that other funds might miss”. 

The report’s authors say that adding more women to the investment team could lead to more diversified portfolios and warn that a lack of diversity could lead to unconscious biases affecting funding decisions and performance.  

According to EWVC, female investors are also two to three times more likely to invest in female founders, who continue to struggle to raise capital to start or develop their ventures, with only circa 2% of VC money in Europe currently raised by female founders. 

Paul Donovan, chief economist of UBS Global Wealth Management, one of the report’s partners and quoted in the report, said that the venture capital industry was, in some ways, a textbook example of economic failure: “Whether through unconscious bias or structural barriers, female entrepreneurs have to work harder than they should to access the capital they need. As well as failing to balance demand for the limited financial resources that are the raison d’être of the venture capital industry, there is also evidence that venture capital underappreciates its own talent.”  

He added that the double failure of venture capital was only being addressed very slowly.  

“Until barriers and bias are more rigorously challenged, venture capital will continue to be an economic problem,” he added. 

The report’s authors also point to correlations between greater senior female representation in the VC space and progress towards the United Nations Sustainable Development Goals. 

Speaking to Impact Investor, Simone Brummelhuis, cofounder of Dutch gender lens fund Borski Fund and member of the EWVC, said: “It’s truly encouraging to witness the undeniable evidence pointing towards the favourable financial and societal outcomes driven by diverse investment teams. I’m confident that this will pave the way for more investments to support female-led funds.” 

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