1.3
From Inception
Building from the ground up
Early-stage startups present a unique opportunity for investors to support innovative ideas at their inception, often years before seeing their tangible impact. This phase, where often groundbreaking concepts take shape, is pivotal to turn ideas into reality.
With fewer investment deals in 2023 and higher investor expectations, founders, especially those operating in sectors where proving customer traction is particularly hard, have been particularly impacted.
In this chapter, we dive deeper into the ambitions of European early-stage female entrepreneurs and and the challenges they face, mapping out the investment totals and therefore the opportunities to back them in the later-stages of their development.
Key insights
Slow fundraising pace has been the key fundraising challenge for 32% of the female founders that completed our survey.
Managing the workload of the fundraising process is the second-most common challenge, with 29% of early-stage founders identifying it as a key obstacle.
As much as 40% of all startups in those countries are newly-backed companies.
Our survey reveals that 44% of angel investors see an improvement in deal flow quality of female-founded companies, with 4% noting a significant improvement.
Our survey reveals that it takes on average over five months for early-stage female founders to raise funding. with 53% of female founders finding the fundraising process longer than expected.
while 13% of angel investors reported a significant surge in female-led startups, early-stage VC investors held a more modest view, with only 3% seeing a significant increase. This discrepancy suggests that there are more female founded deals at the the top of the funnel.
Additionally, 42% of VCs believe that the low number of companies they see and the quality of business propositions that do not meet their expectations are the reasons behind the lack of investments into female-founded companies over the past 12 months.
while 13% of angel investors reported a significant surge in female-led startups, early-stage VC investors held a more modest view, with only 3% seeing a significant increase. This discrepancy might suggest that there are more female founded deals at the earliest stages of business formation.
Total capital raised in 2023 by European early-stage female founders
Total capital raised by European early-stage founders in 2023.
€0.49B
Notes: Early-stage founders' are defined as those who have raised total funding of €5 million or less to date.
Source: Dealroom
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Founder, The Landbanking Group
Dr. Sonja Stuchtey
$11m Seed round in October
Germany
"I'm not only passionate about sustainability, but I am also an experienced entrepreneur. I know why I'm doing what I am doing. Our angel investors have been great sparring partners throughout our journey.
I appreciate having someone who questions and provides specific advice and suggestions. We are tackling a very difficult problem, and it will take time before we start seeing meaningful results. We have been incredibly fortunate to have investors on board who understand the immense potential of our solution and do not exert undue pressure for measurable results while we are laying the foundations of our business."
Angel investor sentiment
remains positive
In our survey, we asked European angel investors, who are often the first backers of female entrepreneurs in Europe, about their views on the capital being deployed into these entrepreneurs.
The majority of respondents believe that the current climate for fundraising for female founders is more favourable than it was twelve months ago, with just under 20% being less optimistic.
Compared to 12 months ago, are you more or less optimistic when it comes to the amount of funding going to female-founded companies in Europe?
Angel investors only
Notes:
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President, Green Angel Ventures
Nick Lyth
United Kingdom
"Early-stage investment is an excellent barometer for the future.
The choices early-stage investors make reflect the world they want to see in the decades to come."
Angel investors see more female-founded companies in their deal flow
Our survey data finds that nearly half of angel investors that made at least one angel investment in the past year have seen an increase of female entrepreneurs in their deal flow over the past twelve months, with 9% of them seeing a significant uptick. 37% of angel investors report no change.
Thinking about your pipeline, what change in the deal flow of companies (co)founded by women have you observed in the past 12 months?
Angel investors only
Notes:
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Angel Investor
Nzube Ufodike
United Kingdom
"2023 began with cash flow and liquidity challenges for many companies.
As a result, I decided to lean in a bit more to support my portfolio companies, particularly those that were in the middle of a fund raise. Buzzword du jour, "AI", also featured on our radar. Tough market conditions all round but fundraising with VCs remains a viable option for high quality companies."
Angel investors see higher quality female-founded startups in their pipeline
As much as the quantity of companies going through a deal pipeline might result in a higher number of companies being funded, it is really the quality of deal flow that is critical for actually making an investment.
When asked about the quality of female founded companies they have seen over the past 12 months, angel investors report seeing a higher quality of deal flow.
Our survey reveals that 44% of angel investors see an improvement in deal flow quality of female-founded companies, with 4% noting a significant improvement.
47% of angel investors see no change in deal flow quality and even though just under 10% angel investors say that the quality has actually worsened, our findings suggest a generally optimistic view of the quality of women-led startups in the angel investment pipeline.
Thinking about your pipeline, what change in the quality of deal flow of companies (co)founded by women have you observed in the past 12 months?
Angel investors only
Notes:
An increasing number of angel investors is keen on making more investments into female-founded companies
Our overall positive findings regarding both the quality and quantity of deal flow of female-founded companies that angel investors see going through their pipeline might be attributed to another interesting trend.
When asked about their proactivity in seeking investment opportunities in female-founded companies compared to last year, it is interesting to see that almost half of angel investors currently spend more time actively searching for investment opportunities into female-founded companies.
Although 46% indicate no change in their level of proactivity, and just under 10% actually has been spending less time over the past year seeking deals with female founders, the overarching trend leans towards a moderately positive direction.
This suggests that, despite a significant portion maintaining their existing investment efforts, there is a notable shift towards increased interest in female-founded companies among angel investors.
In the past 12 months, have you spent more or less time proactively looking for investment opportunities into companies (co)founded by women compared to last year?
Angel investors only
Notes:
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Angel investor
Sokhiba Mukhitdinova
United Kingom
"As a founder seeking angel investment in 2024, I would consider targeting those investors that can materially add value to your business.
Those angels who have experience or are currently working in the industry related to your startup, can bring not only capital but also valuable industry knowledge, network of contacts and even help you with hiring. Getting smart capital for your startup has never been more important, when there is more emphasis put on sustainable growth."
Network is key for angel investors looking for deals with female-founded startups
For those angel investors who are proactively seeking more investment opportunities into female-founded startups, network seems to play the biggest role, with networking events and network outreach being preferred strategies for 57% of them.
33% of angel investors are also keen on seeing more startups at demo days, 29% of them prefer to leverage social media to increase their female-founder deal flow.
Interestingly, more traditional methods like conferences and mentorship programs are not used by angel investors in their proactive outreach, with each scoring a bare 0%. Angel investors are also not keen on utilising intelligence software.
What have been the key strategies used by you to find more companies (co)founded by women?
Angel investors only
Notes: Respondents had the option to select multiple answers.
Austria, Netherlands and Estonia see the biggest proportion of freshly backed companies founded by women
Despite the overarching trend of capital deployment slowdown, some countries were particularly active at the earliest stages of investment.
Austria, the Netherlands, and Estonia were the top countries on the list with the highest proportion of female-founded startups that secured their first investment check.
Share of female-founded companies (%) with first time investment per country, 2023 and earlier
Tap on a bar to reveal the exact percentage
Notes:
Source: Dealroom
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Angel investor
Vera Baker
France
"I am one of those investors who are committed to investing their time and energy into supporting founders who are dedicated to building and creating meaningful businesses.
I often see that female investors approach investing with a different mindset. We do not chase hype or think about short-term gains where we could exit an investment tomorrow and make money quick. Instead, our focus is on investing into our future and committing our resources to more meaningful causes. We're seeking long-term returns, not instant gratification."
Fundraising gets harder for early-stage female founders
Overall, the vast majority of female founders have come to experience the new market reality.
From our survey it is clear that fundraising has become a lot harder for female entrepreneurs than it was 12 months ago. Both early-stage and growth stage female founders have been experiencing fundraising challenges due to the shifting market environment.
In your opinion, is it easier or harder for female (co)founded startups to raise external capital in Europe now than it was 12 months ago?
Female founders only
Notes: 'Early-stage founders' are defined as those who have raised total funding of €5 million or less to date.
It takes over five months for early-stage female founders to raise funding
We asked early-stage female founders who raised capital in 2023, how long it took them to obtain angel or venture capital funding, from the first conversation with potential investors to signing a term sheet.
On average, it currently takes just over five months for European female founders at the earliest stages of company building to secure funding.
On average, it took early-stage founders
to close a funding round in 2023
5.2 months
Note: The duration is counted from the first fundraising conversation with the first investor to the signing of a term sheet.
Early-stage female founders say it takes much longer than expected to raise funding
By combining the actual duration of the process with female founders' expectations, we get a clearer picture of the fundraising experiences of female founders.
In general, female founders who successfully secured funding in 2023 found the process more time-consuming than expected. A significant 53% of early-stage female founders said that it took longer than anticipated to secure funding. In contrast, only 17% found the process to be shorter than expected.
The findings are consistent across different stages of company growth. Despite the ongoing economic downturn for the last twelve months, early-stage female founders find the fundraising process unexpectedly longer.
Was your fundraising process shorter or longer than expected in 2023?
Female founders only
Notes: 'Early-stage founders' are defined as those who have raised total funding of €5 million or less to date. This category only includes founders who successfully closed a financing round in 2023.
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Founder, Consalio
Felicia Mundhenke
€1.2m Seed round in July
Germany
"Many startups that began fundraising at the start of the year had to adjust their expectations in relation to their initial valuations.
A key realisation for me was that a company's valuation isn't solely based on its performance; it's also reflective of market conditions. When everyone’s valuation is going down, it is hard to defend your company’s case to be any different. Accepting this reality, a harsh truth about the sentiment in the investment ecosystem, was difficult for me. Despite putting my heart and tears into achieving 5x growth this year, I had to accept that my valuation also needed to be adjusted."
Investment slowdown is affecting female-founded companies across all stages
As we gather more data on investment deals from 2023, it becomes evident that the investment slowdown has been impacting female-founded companies across all stages, with the number of Pre-Seed and Seed-stage deals down by over 30%
While 2020 and 2021 were peak years for startup investments, the number of investments in female-founded companies in 2023 mirrors the broader market conditions.
Number of European female-founded companies backed at Pre-Seed and Seed stages per year, 2019 to 2023
Tap on the bar to reveal the exact number
Notes:
Source: Dealroom
Early-stage VC investors see a moderate uptick in the number of female-founded companies in their deal flow
We surveyed early-stage VC investors to understand their perception of female-founded companies in their investment pipeline.
Interestingly, while 13% of angel investors reported a significant surge in female-led startups, early-stage VC investors held a more modest view, with only 3% seeing a significant increase.
This discrepancy might suggest that female founders find an easier access to angel investors than VC firms.
Thinking about your pipeline, what change in the deal flow of companies (co)founded by women have you observed in the past 12 months?
VC investors only
Notes: Early-stage VC investors self-identified themselves as 'early-stage' in the survey.
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Founding Partner, VentureFriends
Apostolos Apostolakis
United Kingdom
"Even though we have definitely seen an investment slowdown in 2023, the reality is that capable, strong founders building startups with good unit economics and growing nicely, are getting funded.
I'm excluding AI because due to the current hype you could raise in that field even in the absence of traction. But putting AI aside, all other startups that have a good story, with solid underlying economics, are able to raise funds. The key is clarity: the business story needs to be clear, the path to profitability should be evident, and of course, the burn rate should not be excessively high compared to revenue. The times when startups with high burn rates and low traction could get funding are over."
Early-stage VC investors report a moderate increase in the quality of female-founded companies they see
Quality, even though subjective, is a good indicator of the expected number of companies getting funding. After all, we want to believe that only high quality companies, those with great potential and clear value propositions, should receive funding.
When focusing on the quality of female-founded startups in their deal flow, 36% of VC investors surveyed say they see higher-quality companies in their deal flow.
However, 57% of VC investors have not seen any significant quality improvement.
How does the average quality go deal flow of companies (co)founded by women compare with that of last year?
VC investors only
Notes: Early-stage VC investors self-identified themselves as 'early-stage' in the survey.
Limited deal flow, no fit with investment thesis, and low quality are key reasons for the lack of investments by early-stage VC investors
We asked European early-stage investors who did not make any investments into female-founded companies in the past 12 months about the key reasons for not making deals with female-founded companies.
Interestingly, a lack of alignment with their investment thesis scored 56% of all their responses which suggests missed opportunities on both sides of the equation.
Additionally, 42% of VCs believe that the low number of companies they see and the quality of business propositions that do not meet their expectations are the reasons behind the lack of investments into female-founded companies over the past 12 months.
Why do you believe your fund has not invested in any companies (co)founded by women in the past 12 months?
VC investors only
Notes: Respondents had the option to select multiple answers.
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General Partner, La Famiglia
Judith Dada
Germany
"Your core strategy should always be to build a good business.
Good businesses get funded in all market conditions. Today, the bar for getting funding is high, and so it is crucial for you to be brutally honest with yourself about what aspects of your business are working and what aren't. As a founder, both your runway and the time you invest in your business are precious, so dare to make bold decisions, as too many small changes here and there may not yield the outcome you want."
"Availability of funding and access to investors are top fundraising challenges for female founders" - say early-stage VC investors
In our survey, we also asked early-stage investors to share their perspectives on the key challenges they believe European female founders face when seeking funding.
Access to investors and the availability of funding are the top challenges, said early-stage investors - each scoring over 60% of all responses.
Interestingly, more transactional aspects of the fundraising process such as due diligence processes and deal terms negotiations received the lowest number of responses.
In the past 12 months, which 3 aspects of the fundraising process do you believe female founders have found the most challenging?
VC investors only
Notes: Early-stage VC investors self-identified themselves as 'early-stage' in the survey.
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Founder, AssetFloow
Katya Ivanova
€1.5m Seed round in March
Portugal
"Over the past twelve months, building an AI software company brought unique challenges.
Talent acquisition in the competitive AI market, especially in machine learning, data science, and software development, was our key focus and therefore in 2023 we spent significant time on creating a workplace culture that fosters creativity, diversity, and continuous learning. Staying at the forefront of AI innovation requires substantial research and development efforts."
Early-stage founders point at slow fundraising pace, workload and investor traction as their key fundraising challenges
We also asked early-stage female entrepreneurs who were looking for funding in 2023 about their fundraising challenges.
Interestingly, a slow fundraising pace, consistent with our earlier findings about the duration of fundraising rounds, has been the primary concern for female entrepreneurs.
Managing the workload of the fundraising process is the second-most common challenge, with 29% of early-stage founders identifying it as a key obstacle.
Gaining investor traction makes the top-three list, and it's one of the aspects that clearly affect more early-stage founders, along with dealing with rejections, which also seems to primarily impact early-stage female founders.
What were your top challenges as part of this fundraising round?
Early-stage founders only
Notes: Early-stage founders are defined as those who have raised a total of €5 million or less in funding to date. Only answered by founders who successfully closed a financing round or fundraised in 2023. Respondents had the option to select multiple answers.
Founding Partner, Cavalry Ventures
Claude Ritter
German
"I believe that nowadays more entrepreneurs are starting businesses for the right reasons.
Back in 2020 and 2021, it was much easier to raise money, and entrepreneurs had the safety net of returning to their corporate jobs if their ventures didn't work out. Now the market is different. With corporate layoffs, leaving a stable job is a high risk. Those who are venturing into startups now must be the 'true believers’. For me, it's much more rewarding to work with people who are committed to their entrepreneurial journey despite the uncertainties."
Early-stage female founders prioritise access to relevant networks and referrals to other investors from their existing backers
As much as the fundraising process forms just a part of the company building journey, raising subsequent rounds might prove easier with the support of existing investors.
Among female founders surveyed who had already been backed in the past, referrals to investors and access to a relevant network are the key areas female founders would like to receive extra support from their existing investors, with each scoring above 55%.
Interestingly, more practical aspects of company building, such as legal and operational assistance, rank much lower on the list, with mental health support being one of the least prioritised by female entrepreneurs.
What investor support would you like to receive for your company?
Female founders only
Notes: Early-stage founders are defined as those who have raised a total of €5 million or less in funding to date. Respondents had the option to select multiple answers.
When looking for funding, early-stage female founders prioritise investors with shared vision and exiting relationship
Fundraising, is a two-way relationship where investors and founders need to meet each other's expectations. We decided to delve into the perspectives of early-stage female founders who successfully raised funding in 2023 to understand why they chose their investors.
Despite the current slow fundraising environment and limited funding options available, the top priorities for female founders today are alignment of vision, 35%, and existing relationships, 31%. Investor reputation also matters, along with industry contacts.
What may surprise many is that gender composition and having women in the investor portfolio are not as important for female founders. Those landed on the bottom of the list. Also, only 15% of female founders who raised capital in the survey said that they had no other option when choosing investors as part of the round they raised in 2023.
Why did you choose your latest investors?
Female founders only
Notes: Early-stage founders are defined as those who have raised a total of €5 million or less in funding to date. Respondents had the option to select multiple answers and the answers only include those founders that successfully raised funding in 2023.
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Founder, TitanML
Meryem Arik
$2.8m Pre-Seed round in October
United Kingdom
"I am a founder of an AI infrastructure company and so, the most challenging aspect of building in 2023 has been keeping up with everything that's happening with AI and ensuring that we constantly anticipate the next stage of innovation and development in the AI space.
In 2024, we want to expand the range of models we support to more multimodal models, vision models, audio models, video models, etc. It has been a quite hectic year for AI development, but it has also been a great year."
Almost four in five European early-stage female founders received no competing funding offers in 2023
In 2023, only 22% of female founders that fundraised, had the option to choose between competing funding offers, reflecting current challenging fundraising conditions.
of early-stage female founders did not receive competing funding offers in 2023.
78%
Notes: Early-stage founders are defined as those who have raised a total of €5 million or less in funding to date.
Deal terms overwhelmingly the key reason behind rejected term sheets by early-stage female founders
When we zoom in on the reasons behind term sheet rejections, we find that overwhelmingly, deal terms stand out in stark contrast to other options in our survey.
It is by far the most cited reason behind the term sheet rejections for early-stage female founders who raised funding in 2023. Surprisingly, even though the market conditions for female founders at the growth stage were even more unfavourable, deal terms for them are not as striking.
Only 35% of growth-stage founders who raised funding in 2023 pointed to deal terms as the reason behind their term sheet rejection.
Why did you decline those investment offers?
Female founders only
Notes: Early-stage founders are defined as those who have raised a total of €5 million or less in funding to date. Only answered by founders who declined term sheets as part of their financing round in 2023.
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Founder, Kestrix
Lucy Lyons
£500k Pre-Seed round in September
United Kingdom
"As part of our fundraising round in 2023, we did not have the luxury to choose investors. Our cap table reflects this—currently, we have only two female investors on our cap table.
The importance of investor gender representation is undeniable, but achieving a balanced investor mix can be challenging; As we approach our next fundraising round in early 2024, we are committed to be actively seeking out and encouraging the participation of female investors.
Switzerland, Sweden and France see the highest percentage of Pre-Seed and Seed stage female-founded startups that never raised capital again
For various reasons, even companies that secure Pre-Seed and Seed stage backing may never raise capital again.
These companies might have either never sought additional funding or ceased operations altogether.
We have analysed the countries within our scope to determine the proportions of early-stage female-founded companies that never received any other form of funding compared to the other female-founded startups that did raise funds.
Over 60% of female-founded startups in Switzerland, Sweden and France that raised Pre-Seed or Seed funding never raised capital again.
Cumulative share of companies that never raised again after Pre-Seed and Seed rounds, as of 2023
Tap on a bar to reveal the exact percentage
Notes:
Source: Dealroom
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Founder, Xihelm
Maria Ghibu
Was fundraising in March
United Kingdom
"We have decided to take a pause in building our company this year.
When we started fundraising for our Pre-Seed round in March, we were pre-product and pre-revenue, and what we did not expect was the market being so adverse. We were a great team, with strong industry experience, a PHD in robotics and a top-school MBA, at one point this year, we were even recognised as one of the most promising European startups in robotics. However, in the current market this was not enough. Every investor we spoke to, including those specialising in deeptech, expected to see a finished MVP and meaningful customer traction. Demonstrating this, particularly in our field of robotics, proved to be extremely difficult."