Founding is Not (Yet) Female: How Founder Institute Munich Wants to Fight the Odds

This guest article was written Founder Institute Munich Co-Director Claudia Schaller, and was originally published on LinkedIn. 

A few months ago, six amazing entrepreneurs graduated from the Founder Institute Munich. And while I am proud of each one of them, I am particularly proud of our four female Founders: Dr. Jutta Merschen (everday.io), Dr. Tina Ruseva (Mentessa), Andreea Octavia Stancu (HoneyJoy) and Beenish Waris (Connect Platform). 

THE FEMALE ADJECTIVE

Upfront: I don't like the adjectives "male" and "female". They not only separate, they also limit. Gender is fluid and exists on a spectrum, in many cases even on a genetic level. For the simplicity of this necessary discussion though, I'll stick to those buckets and terms. Usage of the "female" adjective is an even bigger annoyance to me; there’s no such thing as a “female Founder”, “female Architect” or “female Scientist”. It is simply “Founder”, “Architect”, “Scientist”. The gender descriptive adjective strongly implies men are the norm, women are not. It distracts from the actual noun, indicative of what is truly important - her specific achievement and skill set. Unfortunately though, women aren’t the norm if it comes to founding a startup. Gender disparity in entrepreneurship is big. 

FOUNDER INSTITUTE - NOT FOR THE FAINT OF HEART

Let’s back up a little bit. Andreea, Beenish, Jutta and Tina graduated from Founder Institute, a pre-seed startup accelerator founded in 2009 in Silicon Valley by Adeo Ressi (see picture below). Infamous for being one of the toughest startup-building programs, its philosophy and curriculum has since spread around the globe, making Munich one out of 180 chapters worldwide. Founder Institute’s biggest differentiator is the close collaboration with experienced local CEOs as mentors who provide expertise and weave a supportive network lasting beyond graduation. The curriculum of the 14-week program, during which incorporation is a must, touches every important step of the business-building process; it is in-depth, hands-on, work-intensive, collaborative and fast-paced; just like the startup world. It’s designed to push participants to the limit, especially when juggling full-time jobs and families. No surprise, on average less than 30% make it through the program. However, graduated startups benefit from an 80% post-survival rate, compared to the regular 10% seen without. This makes Founder Institute a premier pre-seed accelerator, with a current graduate portfolio value of $20 billion and more than $800 million raised from investors. 

LESS WOMEN THAN MEN ENROLL - WITH A HIGHER CHANCE TO GRADUATE 

Internal data shows Founder Institute Munich has so far attracted only a small number of women. Since the accelerator’s establishment in Munich in 2013, only 22 women (18%) have been enrolled (versus 101 men). Seven of them made it to graduation (versus 23 men), four of them just in the last semester. Silicon Valley’s chapter shows a higher female participation rate where women make up 30% of enrollment. Dropout rates among women are overall lower; in Munich and Silicon Valley 32% of women made it to graduation (versus 23% of men). A handful cities like Oslo, Washington DC, Sacramento, New York City and Chicago lead the way with 50% of graduates being women.

FIRST FEMALE CO-DIRECTOR - DID I MAKE A DIFFERENCE? 

I onboarded as first female Co-Director in Munich in 2018, sharing responsibilities with Nathan Evans and Robert Kitson. We Co-Directors recruit, guide, consult, connect, we hold hands and crack whips - we’re the face of the accelerator. So was it a coincidence that the last semester started out with seven female versus eight male participants, a much better female to male ratio than ever seen before in Munich? Did it need a female Co-Director to attract more women into the accelerator? While I like to believe I made a difference, hard numbers convince me otherwise: economic opportunity in general, but especially in entrepreneurship, shows a huge and stagnant gender gap. 

GLOBAL GENDER GAP IN ECONOMIC OPPORTUNITY CLOSED BY ONLY 59%

According to the World Economic Forum’s Global Gender Gap Report 2018 (1), many countries achieved milestones towards gender parity across education, health, economic and political systems, but there remains much to be done. 149 countries were assessed with just 17 that currently have women as heads of state. Globally, women hold just 34% of managerial positions. Call yourself lucky if Western Europe is your home, the region with the highest level of overall gender parity (75.8% versus 68% globally). In the sector of economic participation and opportunity, only 59% of the gender gap globally is closed (see Figure 2). Germany holds rank 14 on the global index list (two ranks down since 2017), right before the US (rank 15). Iceland, Norway and Sweden head up the list; but don’t be fooled, those countries have closed their overall gender gap only by 85% or less. While Germany shows almost no disparity in the categories of health and educational attainment, economic participation and opportunity as well as political empowerment score fairly low.

WOMEN AND MEN HAVE EQUAL ENTREPRENEURIAL SPIRIT - BUT ONLY 17% OF STARTUPS HAVE A FEMALE FOUNDER

Being aware of the overall existing gender disparity, it is no surprise that the startup world is a male-centric ecosystem. In Germany, only 15% of startups have a female Founder according to the European Startup Monitor (2). European average is 17% (2), a number matching with Crunchbase’s global analysis (3). Do women simply lack the so called entrepreneurial spirit to begin with? Entrepreneurial spirit is defined by having a mindset of seeking change, taking a higher though calculated risk, being proactive, optimistic and passionate. According to a study published by Ipsos in 2018, 61% of women versus an almost equal 64% of men show an either very high or high entrepreneurial spirit (4). The desire to innovate and create a better tomorrow seems to have no gender bias.

GENDER GAP DEEPENS FROM ACCESS TO INVESTMENT ALL THE WAY UP TO THE C-SUITE

Once you have founded, you are on the trajectory of finding investors, scale, hire and further down the road, create a board. At all those stages women face disadvantages. Susan Lyne, a Co-Founder of BBG Ventures, believes that “the biggest issue is not the number of women starting companies, but the access to capital as you move up the food chain” (3). Female-led startups are 63% less likely than male-led startups to obtain venture capital as they move through seed, early and late-stage ventures, as recently published by Columbia Business School (5). In 2018, U.S. female-founded startups have raised just 2.2% of venture capital investment (6); and sadly, only 2% of unicorns were founded by a woman over the last decade (7). And if you think more mature startups would take the opportunity to hire female executives and board members, you’d be wrong. Data released by the Silicon Valley Bank in 2018 revealed that only 29% of tech and healthcare startups had a woman on their Board of Directors; a number that has risen to 37% in 2019, due the public awareness that was raised over this issue (8). In Germany, established corporations are currently the worst role model in terms of gender parity: only 8.5% of board members are women (9), prompting Chancellor Angela Merkel to consider introducing policies to address this imbalance. She clearly speaks how woman are actively denied access to leading positions (“Verweigerungshaltung”). And as of 2019, just 33 out of the Fortune500 companies had female CEOs, which is considered an all-time "high" (10).

108 YEARS TO CLOSE ECONOMIC GENDER GAP - NEW AI-RELATED GENDER GAP EMERGES

I am an eternal optimist, but according to the numbers released by World Economic Forum’s Global Gender Gap Report 2018 (1), the future doesn’t look female. Projecting current trends, it will take 108 years to close the current economic gender gap globally. While the numbers for Western Europe look brighter (61 years), we start facing a new threat: the Economic World Forum warns about the possible emergence of new gender gaps in advanced technologies, such as with artificial intelligence-related skills. In collaboration with LinkedIn, it was shown that only 22% of AI professionals globally are female, compared to 78% who are male. A gender gap which has remained constant over the last years (1). McKinsey’s recent report about the “Future of Women at Work", points out as well the new challenges women face at the age of automation; globally, 40 million to 160 million women may need to transition between occupations by 2030, often into higher-skilled roles. If they make these transitions, women could find more productive, better paid work but if they don’t, they could face a growing wage gap or could be forced to leave the labor market entirely (11).

IS THE “CONFIDENCE GAP” THE CAUSE?

Debating the question what holds women back could fill several pages. Even in contemporary western societies, patriarchal structures combined with cultural norms and expectations are rooted deeply. Childcare, taking care of elderly parents and other unpaid chores are mainly shouldered by women. The fact that women spend twice as much time on housework and other unpaid activities as men has a significant impact (1). Positive change did come from closing the educational gap over the last decades, at least in many Western societies. In Germany and the US, women earn more college and graduate degrees than men do (12, 13). With equal competence between genders, what could be the one determining factor that slows women down? A research study by David Dunning and Joyce Ehrlinger at Cornell University in 2003 found an interesting phenomena referred to as the “Confidence Gap” (14). While exploring the relationship between competence and confidence amongst men and women, men overestimate their abilities and performance, while women underestimate both; even though their actual abilities and performances did not differ in quality between them. Men even display something called “Honest Overconfidence” a genuine belief they are better, as studied by Cameron Anderson at University of California, Berkeley (15). The lack of confidence in women is the reason why we want to be perfect, experience discomfort around discussing money and display a higher need of being liked, as author and entrepreneur Jane Wesman discusses in her book Dive Right In – The Sharks Won't Bite: The Entrepreneurial Woman's Guide to Success. Written in 1995, Wesman recently pointed out she sees the same issues holding female entrepreneurs back since decades (16). Many publications debating this issue followed, the most popular ones being Sheryl Sandberg's Lean In as well as Katty Kay and Claire Shipman's The Confidence Code: The Science and Art of Self-Assurance – What Women Should Know. All with the message: To succeed, competence AND confidence are both crucial. 

THE BENEFIT OF EQUALITY AND DIVERSITY

We must change the current status quo. Not because it is simply more fair, but because we all would benefit from equality. Many global studies conducted by for example the Peterson Institute for International Economics, have found that companies employing women in large numbers outperform their competitors on every measure of profitability (17, 18). And a diverse leadership team across gender and cultures boosts innovation in particular (19). No surprise that startups founded and cofounded by women perform better over time relative to startups founded by men only, according to a study by BCG and MassChallenge (20). These companies generated 10% more in cumulative revenue over a five-year period; for every dollar of funding, these female-founded startups generated 78 cents, while male-founded startups generated just 31 cents. McKinsey’s extensive “Women Matter” study sheds light on how closing, or even narrowing, the gender gap in work would have significant global economic impact; as much as $12 trillion could be added to annual global GDP growth in 2025, or 11% to global 2025 GDP (21). Convinced that we all benefit from equality and diversity?

WTF CAN WE DO?

I want us to move together towards a more inclusive and better future. And while I don’t have the perfect solution ready, I believe every single step counts. At Founder Institute Munich we took the first measure: we welcomed two more female Co-Directors: Dr. Jutta Merschen, a recent graduate and ex-McKinsey consultant and Magdalena Muttenthaler, a previous mentor and serial entrepreneur. The three of us will focus on recruiting more women into the upcoming 2020 accelerator program. We want to show that “Founding Is Female” and women with entrepreneurial skill sets are needed more than ever. And because we know how much role models matter, we will actively increase the number of female CEO mentors and advisors for Munich. Our efforts are supported by the Female Founder Initiative which has been recently launched by Founder Institute’s Silicon Valley headquarter. But nothing is more convincing than real experiences: our previous graduates Andreea, Tina, and Beenish are active alumni, inspiring other women by sharing their true entrepreneurial stories. I have hope that once we (women AND men) join efforts, we will be able to close the existing gender gap in the future; the surprisingly high number of 2019 female-born unicorns is a sweet indicator (22). Still, there’s a long road ahead. Let’s get back to work! 

About the author: Claudia Schaller is a hybrid professional combining Entrepreneurship and Life Sciences. She received her PhD for researching the immune system at University of California San Francisco. At Eight Inc, a global innovation and experience design consultancy, she worked with Silicon Valley companies like Apple, Dolby and Tesla. She's Co-Director at Founder Institute Munich and currently develops her own ventures at the intersection of science and entrepreneurship. She's an advocate for equality and will launch Changemaker Chats, a platform for female empowerment, in Munich in Fall 2019. She lives between California and Germany. 

Links: 

1. World Economic Forum’s Global Gender Gap Report (2018)
2. European Startup Monitor, page 26, published by ESM (2018)
3. Teare Gené: “In 2017, Only 17% Of Startups Have A Female Founder” (2017)
4. Entrepreneurialism 2018, page 10, published by Ipsos (2018)
5. Guzman J, Kacperczyk A: Gender Gap in Entrepreneurship” (2018) Columbia Business School Research Paper
6. Clark Kate: “Female founders have brought in just 2.2% of US VC this year (yes, again)” (2018)
7. Choksi Siddharth: “SV Founders Report (1/5): How Big is the Gender Gap in the Startup World? (2017)
8. US Startup Outlook 2019, page 11, published by Silicon Valley Bank (2019)
9. Der Spiegel (2019)
10. Zillman Claire: “The Fortune 500 Has More Female CEOs Than Ever Before" (2019)
11. McKinsey & Company: “The Future of Women at Work - Transitions in the Age of Automation” (June, 2019)
12. Destatis - Statistisches Bundesamt (2019)
13. Napolitano Janet: “Women Earn More College Degrees And Men Still Earn More Money” (2018)
14. Ehrlinger J, Dunning D: “How Chronic Self-Views Influence (and Potentially Mislead) Estimates of Performance”, in Journal of Personality and Social Psychology (2003)
15. Anderson C, Brion S: “Overconfidence and the Attainment of Status in Groups” for Institute for Research on Labor and Employment (2010)
16. Wesman Jane: “For Decades, These Same 3 Issues Have Held Women Entrepreneurs Back. Here's What You Can Do About It.” (2018)
17. Noland M, Moran T, Kotschwar B: “Is Gender Diversity Profitable? Evidence from a Global Survey” (2016), Peterson Institute for International Economics
18. Miscerola M: “Higher Returns with Women in Decision-Making Positions” (2016), by Credit Suisse
19. Lorenzo R, Voigt N, Schetelig K, Zawadzki A, Welpe I, Brosi P: “The Mix That Matters - Innovation Through Diversity” (2017), by BCG
20. Abouzahr K, Brooks Taplett F, Krentz M, Harthorne J: “Why Women-Owned Startups Are a Better Bet” (2018), by BCG
21. McKinsey & Company: “Women Matter - Time to Accelerate. Ten Years of Insights into Gender Diversity” (October, 2017)
22. Mascarenhas M: “Female-founded Unicorns Are Being Born At An Unprecedented Rate In 2019, Data Shows” (2019)

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