Tipping The Scales: Luxembourg Invests In Gender-Smart Capital

Abstract image of a female founder created by DALL-E

Luxembourg has put its money where its mouth is, injecting €1M over four years into a catalyst that boosts gender-smart capital and financial services.

At the end of February, the Luxembourg finance ministry announced it had become a key partner of 2X Global, an organisation for investors, capital providers, and intermediaries working in public and private markets, whose 2X Challenge “invests in women who invest in the world”.

Globally, women-led startups make up the minority when it comes to VC funding. In the US in 2022, all female teams accounted for just 1.9% of all VC funding raised, down from 2.4% in 2021, according to financial database Pitchbook. In Europe, the proportion of VC funding making it into women-led startups fell from 3% to 1%, according to the State of European Tech report.

In a statement, the finance ministry acknowledged the role of gender finance in developing a sustainable economy.

Luxembourg finance minister Yuriko Backes is pictured with Jessica Espinzoa, CEO 2x Global, on 24 February 2023. (Photo: Luxembourg finance ministry)

“Women-led businesses have the potential to drive economic growth and create more inclusive societies, and we are committed to supporting their success. This support reflects our strong belief in the power of gender finance to make a positive impact on women’s lives on our societies and economies,” Luxembourg finance minister minister Yuriko Backes said. 

A 2022 EIB survey presented compelling evidence on the many advantages that female-led firms offer, including sound management practices, supporting green transition and generating positive spillovers. It wrote: “Female entrepreneurs are role models for women’s empowerment and make significant contributions to the economy. Supporting female entrepreneurs helps create new jobs while generating societal benefits.”

Where are we going wrong?

Historically, funding for all-women teams declines during periods of financial uncertainty. The situation is further exacerbated by a shrinkage in overall funds available. In Europe, total VC raised fell from €108.9B in 2021 to €91.6B in 2022, Pitchbook data shows. 

That there are not enough women in the ecosystem in general is a major contributing factor. Women are under-represented in VC and angel investing, representing 15% of cheque writers, a proportion which is changing thanks to pressure for change from women in the industry. And they are in the minority among startup founders–in the EU, all-female tech startup/scaleup teams make up 11% of the ecosystem, according to the EIB

“I think that statistically men get more funding because they’re more represented”

Daniela Cedola, a partner at PWC Luxembourg

“I think that statistically men get more funding because they’re more represented,” Daniela Cedola, a partner at PWC Luxembourg said, adding: “Females are making different choices  […] We have to juggle multiple roles. The majority of women are mothers, and it’s very hard to find the time.” 

Cedola works with investors on programmes supporting investment readiness for startups. Depending on the sector, she said that it was challenging to attract female-led startups for the programmes. The expert observed that women founders tended to be more numerous in the lifestyle sectors, which may have less of an element of scaling technology. However, women were increasingly becoming present in healthcare startups. Cedola said she expected the gender gap between founders to close in this field, faster than for space, IT or energy tech, for example.

Maria Mateo Iborra, CEO and founder of IBISA (Photo: Silicon Luxembourg)

Not Over-Promising 

Founder of fintech startup Ibisa Maria Mateo Iborra believes women-led ventures receive less VC equity because they are realistic in their growth expectations. 

She said: “We get challenged more about how aggressive our growth is and how big is our ambition.” The founder believes that women’s responses tend to be “based on what we think is reality and not promising more than what we can deliver […] I’ve seen this in many women founders. Men founders are more capable of selling the dream of aggressive growth. But then the execution is not always there. Or it’s not the hockey stick [growth trajectory].”

More Than A Business Arrangement

Sometimes, women founders shun the VC path because they want to retain equity, fearing the dilution of their values and/or vision or the need for aggressive growth.

“We didn’t take on any assets with WIRE because we didn’t want someone else taking a decision for us,” Lovisa Löwenberg, co-creator of female investment platform WIRE Invest, said, adding: “And when you take on equity you felt you feel like you have to really do the hockey stick, you have to really grow so fast, to go crazy and work 24/7. And it just doesn’t match women’s lifestyles.”

Löwenberg is currently examining alternative fundraising strategies that will offer female entrepreneurs something more than just a business arrangement, by building a community of investors with smaller tickets. “The advantage of that would be that women could also create a community and have that interaction with the investors, so it might feel a little bit more like a family.”

Lovisa Löwenborg, pictured, is a Swedish entrepreneur and investor (Photo © Maritha Estvall / Gefle Dagblad)

Be Open-Minded

Looking to the future, the solutions will be multifaceted. Iborra is firm in her belief that women founders should not change, but rather gain experience. “I think it’s more this learning experience of if I can get this money, how can I accelerate my plans? Or how can I think beyond my plans?” At the same time, she reckons that VCs need to gain experience from working with female founders to build more diverse portfolios.

“Another thing that I learned is to go to a meeting, even if it’s with all men, without thinking that there will be bias. Be open minded,” Iborra said. 

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