The lack of Diversity and Equity in European startup ecosystems

Diversity and equality are key drivers for increasing business competitiveness and success. Scientific studies, specialists and business reports alike confirm this evidence. The lack of diversity and equality costs the innovation ecosystems returns, talent and innovation, hitting the economy, communities, and enterprises. Yet, empirical evidence reveals that the European startup ecosystem is quite homogeneous and the slow progress on diversity and equity is capping the addressable market for ideas, solutions, and talent.

Across Europe, underrepresented founders are being excluded from opportunities of equity investment at a very early stage of their businesses. Black Founders are particularly left behind and excluded from these opportunities, disproportionately lacking access to the networks and capital needed to build, grow, and scale their businesses. Black Founders are at an astounding disadvantage.

“Although 77% of tech startups led by Black Founders generate high revenues and create, on average, 5.4 job opportunities, these entrepreneurs don't receive equal investment and support opportunities as other groups.” (Diversity Beyond Gender, Extend Ventures, 2019)

Not only is it not easy to raise capital, but the challenge is not equal for all. For female founders, the landscape is even more concerning: only 0.02% of total venture capital invested in the last ten years in the United Kingdom was allocated to Black Female Founders (Diversity Beyond Gender, Extend Ventures, 2019).

The lack of official and meaningful data on ethnicity/racial representation (including Africans and people of African descent) and their activities, hinders the opportunities of attaining informed knowledge, as well as accurate mapping, decision making and action.

The importance of diversity goes across the whole innovation ecosystem, and issues regarding representation are starting to be discussed by different agents at multiple levels.

“The ecosystem is aware that it needs to improve at diversity and inclusion level but still has a long way to go.” (State of European Tech, Atomico, 2021)

In 2020, Dealroom, acknowledging the lack of information in this area, launched an international ‘call for data’ addressing founders, Venture Capitalists (VCs), executives, and experts with the intention of mapping the gender and racial diversity in the technology sector.

Diversity and equality at all levels of the ecosystem is the differentiator factor in the innovation equation. More diverse investor groups increase the willingness to invest in more diverse startups. However, there is still a lack of structural interventions to address this issue and explore further opportunities and pathways for change.

The cost of not acting is far too high and if we act now, we can begin to close this diversity and equality gap in Europe. It all starts with relevant and contextualised data, allowing us to spark the right conversations and develop bespoke strategies and solutions to create an even playing field for underrepresented and underserved founders in Europe. Data, in different shapes and forms, has always been a key foundation for any meaningful change.

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The?AFROPRENEURS Report - State of Black Founders & Ventures in Portugal?is now available and can be downloaded here:?www.afropreneurs.pt.