Shaping the Future: The Rise of Female Angel Investing in European Tech

By: Ulyana Shtybel, Founder & CEO, Quoroom | Wednesday, 8 May 2024

Ulyana Shtybel is a former Executive Director of the Warsaw Stock Exchange Office in Ukraine. She has 12+ years of experience in finance and capital markets. She is a startup mentor and adviser. Co-founder of two fintech incubation programs in partnership with Mastercard, OTP Bank and National Bank of Ukraine. Researcher in the field of Impact Investing. PhD in Economics.

In the vibrant tapestry of European tech startups, a remarkable shift is underway, led by a formidable group: female angel investors. These women are not just reshaping investment paradigms; they are championing innovation, diversity, and sustainable growth. In this exploration, we delve deeper into the rising prominence of female angel investing in Europe, unravel its profound impact, and underline the imperative of empowering more women in investment decision-making processes as well as provide more female founders with the equal opportunities to be selected, heard and considered when they are pitching their business. Female angel investors play a critical role in diversifying the startup ecosystem and supporting underrepresented founders.

Breaking Funding Records: Pioneering Paths of Female-Founded Startups

Historically, female-founded startups have navigated a labyrinth of funding challenges. According to the Atomico’s State of European Tech report, the proportion of funding raised by women-only teams dropped from 3% to 1% since 2018. However, recent data paints a promising picture of transformation within the entrepreneurial landscape when it come to participation of female as co-founders in startups.

All-Time Highs in 2023:

In a watershed moment, female-founded startups, those with at least one woman co-founder, reached unprecedented milestones in 2023:

- They accounted for a substantial 20.5% of the total deal value generated by startups across Europe, marking a noteworthy 5.2% surge from the previous year.

- In terms of deal count, they represented 25.8% of all funding rounds, a testament to their growing influence and viability.

This progress is particularly noteworthy as historically, all-male founding teams have dominated funding rounds since 2010. However, these recent shifts highlight a changing narrative and a more inclusive investment landscape.

Regional Leadership and Dynamics

Certain regions have emerged as beacons of support for female-founded startups:

- The United Kingdom and Ireland emerged as frontrunners, securing a substantial 40% of the funding raised by startups with at least one female founder in 2023, totaling €4 billion.

 - France closely followed with 25.9%, showcasing a robust ecosystem for diverse       entrepreneurship.

The DACH region (Germany, Switzerland, and Austria) contributed 16.1%, further emphasizing the pan-European nature of this transformative trend.

However, amidst these successes, the Nordics experienced a decline in their share, signaling a need for continual support and investment in diverse entrepreneurial endeavors.

The Echo Effect: More Female Angels, More Female-Led Companies

Research consistently underscores the pivotal role of female angel investors in driving success for female-led companies. The symbiotic relationship between the number of female angels and the growth of female-led startups forms a virtuous cycle:

Female-led startups receive critical funding and mentorship.

These startups flourish, attracting more female talent into the ecosystem.

This cycle perpetuates, fostering a supportive and conducive environment for sustained growth and innovation.

The Decline & Resilience of Female Angel Investors

In 2023, the number of active female angel investors declined by 42% compared to the previous year.However, this decline followed a surge in 2021, indicating overall progress.

Despite the drop, female angels maintained a similar percentage share of total angel deals in 2023.

Despite a temporary decline in the number of active female angel investors in 2023, following a surge in the previous year, the overall trend showcases resilience and progress. Female angels continue to maintain a substantial share of total angel deals, underlining their enduring impact and relevance. 28% of female-founded companies that raised funds from angel investors had participation from female angels (compared to 2022’s 30.9%).

We expect that this trend will continue number of angel investor continue to grow. The wealth landscape is undergoing a seismic shift, with $68 trillion poised to transfer from baby boomers to millennials by 2030. This massive wealth transfer not only decreases inequality between generations but also fuels a surge in venture capital (VC) and impact-focused investing and female investing.

Advancing Diversity in Investment Decision-Making

The imperative of having more women in investment decision-making roles cannot be overstated. VC funds with greater gender diversity exhibit a propensity to invest more in women founders. This diversity translates into enhanced risk assessment capabilities, innovative strategies, and the creation of long-term value for investors and stakeholders alike.

The Investing in Women Code

Initiatives such as the Investing in Women Code serve as guiding principles for promoting diversity within investment circles. By bolstering the ranks of women business angels, we tap into an invaluable reservoir of equity finance. Supporting women entrepreneurs through angel investing not only fuels economic growth and job creation but also fosters a more equitable and resilient entrepreneurial ecosystem.The Women Count 2020 report, conducted by The Pipeline, revealed that FTSE 350 companies with more than 33% female executives had a net profit margin over ten times greater than companies with no women at this level.

Empowering Female Founders: Unlocking Equal Opportunities

Beyond the numbers and statistics lies a profound truth: female angel investing is a catalyst for providing female founders with equal opportunities to be selected, heard, and considered when they pitch their businesses. Here are some key insights into why this aspect is crucial:

1.Representation Matters.When female angel investors actively participate in funding rounds, they bring a unique perspective to the table. They understand the challenges, opportunities, and nuances that female founders encounter in the startup journey. This representation is not just symbolic; it translates into tangible support, mentorship, and advocacy for female-led ventures.

2. Breaking Biases and Stereotypes.The investment landscape has historically been skewed towards male entrepreneurs. By actively involving more female investors, we challenge and dismantle biases and stereotypes that hinder women from accessing capital and resources. This shift contributes to a more inclusive and merit-based evaluation of startups, irrespective of the founder's gender.

3. Amplifying Voices.Female angel investors amplify the voices of female founders in investment circles. They provide a platform for these entrepreneurs to showcase their ideas, talents, and innovations without facing the barriers of gender bias. This amplification not only benefits individual startups but also contributes to a richer and more diverse entrepreneurial ecosystem.

4. Mentorship and Guidance.Beyond financial support, female angel investors offer invaluable mentorship and guidance to female founders. They understand the unique challenges faced by women in entrepreneurship, ranging from access to networks to balancing work-life dynamics. This mentorship network creates a supportive environment where female founders can thrive and navigate the complexities of scaling their businesses.

5. Long-Term Impact on Innovation and Growth.Empowering female founders through female angel investing has ripple effects on innovation and economic growth. When diverse perspectives come together, it leads to novel solutions, disruptive ideas, and sustainable business models. This diversity-driven innovation fuels economic growth, creates jobs, and fosters a more resilient startup ecosystem.

Embracing a Future of Inclusive Innovation

As we navigate the evolving contours of the European tech landscape, the rise of female angel investors heralds a new era of transformative change. Their investments not only fuel the engines of startups but also lay the foundation for a more inclusive and resilient ecosystem. It is imperative to celebrate their achievements, encourage more women to embrace angel investing, and collectively forge a future where innovation transcends gender boundaries, unlocking untold possibilities for all. Female angel investing isn't just about financial transactions; it's about unlocking the full potential of diverse talents and creating a world where every entrepreneur, regardless of gender, has a fair chance to succeed and thrive.