Women in Tech at a Glance: Start-ups and Entrepreneurship

Written by Katarina Milanovic, Research Assistant for the Women in Business Chair

Despite international efforts to promote gender equality, women continue to face significant challenges in the tech industry. In recent years, numerous reports and studies have shed light on the glaring gender disparities that persist within the tech entrepreneurship and start-up landscape. These disparities are evident in various aspects, including the percentage of women in tech positions, leadership roles, and the creation of start-ups. 

One of the most concerning statistics is that women make up only 25% of total tech positions, as reported by Forbes and the National Center for Women and Information Technology. Another report by McKinsey projects a decline of women in tech roles in Europe to 21% by 2027, highlighting that while the representation of women in tech companies is reaching parity, the share of women in actual tech roles is much lower. Furthermore, this share is smallest among the fastest growing tech fields, such as DevOps and cloud computing.

The gender gap becomes even more stark at the leadership and executive level. The WomenTech Network explains that the applicant pool for tech jobs is highest for junior positions, dropping for mid-level jobs and even more for senior-level positions. In a 2021 report, which surveyed 780 participants in France, EY and French Digitale found that women make up just 12% of digital start-up founders and hold only 11% of CEO positions. Another report by the Boston Consulting Group and SISTA revealed that, across France, UK, Spain, Germany and Sweden, only 10% of start-ups created in 2022 were created by women-only teams, and 12% by gender-mixed teams. 

Factors Contributing to Disparities

Several interlinked factors contribute to these disparities, and they often create a self-reinforcing cycle:

1. Graduating in STEM fields: The widespread gender gap in STEM (Science, Technologies, Engineering and Mathematics) is a major contributor to the gender disparities within tech start-ups and entrepreneurship, as it is within these fields that individuals best acquire the skills needed for success in the innovative entrepreneurship world (OECD, 2018). Despite similar interests and abilities of girls and boys in primary and secondary STEM classes, McKinsey reports an 18% drop in young women pursuing STEM university fields, and a 31% drop when looking at ICT disciplines specifically (Information Sciences, Computer Science and Technology - a subset of STEM fields especially geared towards tech roles) for EU-27 countries for the years 2019-2022. This drop is credited to a difference in the encouragement and support of girls who show interest in STEM, as well as to socialization and traditional gender stereotypes, which affect girls’ and young women’s self-confidence and decisions regarding the pursuit of STEM education. 

The second drop identified by McKinsey is during the transition from university to the workforce. They find that only 23% of women STEM majors move on to tech roles as opposed to 44% of men. This disparity is compounded by the well-documented low retention rate in the tech industry. Alarmingly, over half of women in tech leave the industry by the midpoint of their career—a rate more than double that of men. This leaky pipeline in the career trajectory of women in the tech industry results in a reduced number of women reaching the stage of obtaining leadership positions.  

2. Obtaining Funding: Raising funds is considered as the most prominent problem in entrepreneurship, with female-owned start-ups facing significant challenges in raising capital. The OECD report "Bridging the Digital Gender Divide" states that only 11% of innovative start-ups looking for Venture Capital investments have female founders.  In a sample of 25,000 start-ups operating across a wide set of countries and sectors, Breschi, Lassebie and Menon (2018) present descriptive evidence on innovative start-ups and related venture capital investments. Their analysis provides preliminary evidence that start-ups with at least one female founder are significantly less likely to be funded compared to male-led start-ups. In the case that they were funded, the start-ups received on average 23% less funding than their male-led counterparts, even after controlling for location, nature of the start-up, education level and professional background of the start-up founders. 

Consequently, as The World Bank report on "Leveraging ICT Technologies in Closing the Gender Gap" explains, women entrepreneurs rely much more on internal or informal financing, including personal savings, and face higher interest rates than men entrepreneurs do. Discrimination from funders and women’s lower financial literacy are two possible explanations for this gender gap (Sicat, 2020). Finally, Breschi, Lassebie and Menon (2018) report that women-led start-ups are also 30% less likely to experience a "positive exit", which refers to being acquired or to issue an initial public offering. 

Opportunities for network formation and accessing social networks are considered to be a contributing factor to gender differences in entrepreneurship and VC funding (OECD, 2018). This OECD report suggests that “homophily” may play a role in influencing financing decisions, where investors, who are disproportionately men, tend to favor financing other men, which puts women-led start-ups at a disadvantage in obtaining investments. Recent reports have found that women-led start-ups may be more likely to secure funding from women investors as well, but that these investments tend to be perceived as preferential treatment due to gender, as explained by WomenTech Network. This negative association arising from receiving early funds from a woman investor may harm the chances of women-led start-ups obtaining financing elsewhere in the future. The persistent challenges in accessing funding not only hinder women from initially entering but also impede their ability to sustain and thrive within the tech start-up and entrepreneurship landscape.  

3. Workplace Culture and Environment: The retention challenges faced by women in the tech industry, including start-ups and entrepreneurship, are increasingly attributed to unsupportive workplace environments. Recent insights from Forbes and McKinsey underscore weak management support, limited opportunities, and a lack of work-life balance as primary factors contributing to this trend. McKinsey additionally highlights the isolation experienced by women within male-dominated tech spaces. This sense of isolation is compounded by the presence of a pervasive "boys club" culture and instances of misogyny within the tech start-up industry. An example is the numerous news reports bringing to light instances of sexism, ranging from sexist jokes and casual misogyny to threats of violence, sexual harassment lawsuits within Silicon Valley, one of the most prolific global centers of innovation. 

 Women frequently encounter microaggressions such as being spoken over in meetings or stereotyped, as revealed by a survey on women’s experience within the tech workforce conducted by WomenTech Network. These hostile environments may not only deter women from remaining in their desired roles but could be a contributing factor in driving them out of the industry altogether. Women executives are notably 1.5 times more likely to change jobs in pursuit of workplaces dedicated to diversity, equity, and inclusion according to the WomenTech Network. 

The Importance of Addressing Gender Disparities

The gender disparities in tech entrepreneurship and start-ups are a persistent issue with far-reaching consequences. Addressing these disparities is not only a matter of equity but also efficiency according to business consulting leaders. Efforts to reduce these gender disparities are essential for various reasons:

1. Economic Impact: “Joining Forces for Gender Equality”, published by the OECD, emphasizes that the persistent gender gap in entrepreneurship hinders the economy, through lost opportunities in job creation, innovation, and growth.  Closing the gender talent gap in tech could lead to a substantial increase in GDP, as suggested by McKinsey. Using 2022 data on tech contributions from the OECD, they estimate that a doubling of the tech workforce's share of women by 2027 could result in a GDP increase of €260 billion to €600 billion. 

2. Improved Company Performance: Companies that embrace diversity and inclusion tend to be more successful and profitable, as highlighted by Deloitte, and McKinsey. Forbes explains that the nature of decision-making improves with gender, ethnic and racial diversity, widening its scope and challenging past status-quo decisions. 

3. Empowering Female Entrepreneurs: Even a slight increase in women representation in venture firm partnerships could improve the VC market for female-led start-ups. The OECD reports that VC firms with a female partner are more than twice as likely to invest in a company with a woman on the management team and three times as likely to invest in female CEOs (OECD, 2018). WomenTech Network explains that companies with diverse representation are more likely to adopt best practices. An increase in women in the tech start-up and entrepreneurship landscape would generate a positive feedback loop in creating a more accessible and sustainable industry that is representative of society.  

Continued efforts to promote gender equality in the tech industry, especially among entrepreneurs and within start-ups, are crucial for creating a more inclusive and prosperous industry as well as contributing to a more diverse and innovative future.

References 

Breschi, S., J. Lassébie and C. Menon (2018), "A portrait of innovative start-ups across countries", OECD Science, Technology and Industry Working Papers, No. 2018/02, OECD Publishing, Paris, https://doi.org/10.1787/f9ff02f4-en. 

Organisation for Economic Co-operation and Development (OECD). (2018). Bridging the digital gender divide: Include, upskill, innovate. OECD.

Sicat, M., Xu, A., Mehetaj, E., Ferrantino, M., & Chemutai, V. (2020). Leveraging ICT technologies in closing the gender gap. World Bank, https://elibrary.worldbank.org/doi/abs/10.1596/33165.