Why venture capital still struggles to fund women — and how to fix it

Venture capital (VC) presents itself as a meritocratic environment. Yet despite increased awareness of diversity, equity, and inclusion (DEI), the VC space in Europe remains dominated by men. Only around 2 percent of early-stage funding is currently secured by all-women founding teams. And between 2011 and 2021, only one in 10 funded founders in Europe was a woman. These stubbornly low statistics sit in stark contrast to the growth and ambition of the startup ecosystem as a whole.

Capital flowing to mixed-gender teams is on the rise, but there’s a long way to go to reach true equality in EU VC funding.

A recent study by Chiara Andreoli and Leonora Buckland of the Esade Center for Social Impact, together with Ody Neisingh of Equinox Equality Experts, investigated why women are receiving so little funding compared to their male peers. The study looked at six European VC firms and revealed the extent to which gender bias continues to influence investment decisions, albeit in subtle and subconscious ways. This limits capital flows to potentially high-value ventures.

Venture capital’s blind spot

Venture capitalists often assume they are objective when assessing team quality and execution potential. Buckland says: “We found that investment professionals themselves often struggle to pinpoint where bias enters the process.”

Biases tend to accumulate across the investment cycle. Hidden bias can subconsciously nudge decisions regarding which founders are sourced, how pitches are decoded, and how risks and opportunities are analyzed.

Bias in business isn’t new. Its various forms are widely documented. Affinity bias can come into play where networks are tight and typically male-dominated. This can lead investors to unconsciously favor founders who resemble themselves. Stereotypes defining the ‘typical’ entrepreneur can also persist. A commonly shared characterization of a successful founder is often someone highly competitive, who takes risks —traits traditionally interpreted as masculine. Anyone seeking funding who doesn’t display these traits may be overlooked.

Other hidden biases that can work against women include the idea that motherhood can affect a woman’s long-term commitment to a project. There’s also confirmation bias, which is where investors feel more comfortable with signals and patterns that reinforce their past decisions instead of being open to opportunities to challenge them. In this way, bias is difficult to see and also hard to avoid.

It’s not just bias, it’s the system

A key contribution of the research is to move beyond individual behavior and examine the broader system in which venture capital operates. Bias is not only a matter of personal attitudes; it is centreembedded in structures, norms, and expectations that extend far beyond any single firm. The research also helps shine a light on the wider system in which venture capital functions.

As the authors explain, venture capital firms are influenced by multiple factors. The views ingrained in society regarding gender roles, stereotypes, and inequalities determine who even gets to become an entrepreneur in the first place. For example, women account for only one in three STEM graduates in Europe, limiting the pipeline of founders in sectors that attract the most investment.

The VC industry is still dominated by male investors, and the culture generally rewards bold and ambitious decision-making. This leaves more cautious, risk-averse players out in the cold — even if they put forward strong, evidence-based proposals.

Zoom in to the firm level, and internal processes will only serve to either mitigate or amplify the industry-level effects. Importantly, VC firms are not only molded by the system but also help mold it. “VC firms are dynamic actors in this broader system,” says Andreoli. “Whoever they choose to fund shapes the society of tomorrow.”

Reassuringly, Andreoli says that the VC firms studied, “show a genuine commitment to progress”. And the benefits are wider-reaching than inclusivity alone.

Why investors should care

Addressing gender bias isn’t just a question of fairness; it has performance-related outcomes. “VC investors acknowledge that a lack of representation in decision-making can reinforce structural inequalities,” says Buckland.

There is also a growing recognition that diverse teams can enhance financial performance, help identify new market opportunities, and thus build more resilient businesses. Investors who were interviewed also pointed to the strong presence of women founders in sectors with social and environmental impact, areas that are becoming increasingly important for long-term value creation.

Five levers to change the system

VCs first have to be aware that gender bias exists. This is the first ‘lever’ in the framework to mitigate bias. This involves company-wide training and reflection on an ongoing basis. “Uncovering gender bias is not a simple yes or no exercise,” says Buckland.

The second lever is leadership commitment. It’s a common adage that change starts from the top. Leaders play a critical role in setting priorities and creating a culture where inclusion matters.

The third lever focuses on gender diversity and inclusive culture. Firms with more diverse teams tend to be more open to different perspectives and more likely to fund a broader range of founders. Intentionally hiring women can help resolve the lack of women in VC positions.

The fourth lever involves shaking up the investment process itself. This means standardizing evaluation criteria and actively sourcing underrepresented entrepreneurs. Small changes in the process can reduce subjective judgments.

The fifth lever extends to the wider ecosystem. Engaging with networks, supporting women founders, and collaborating with other actors can help build momentum for change across the industry.

Slow progress but real momentum

There’s no doubt that challenges exist, but as one interviewee noted, “in terms of gender diversity in VC… change is happening, albeit slowly.” Structural factors, entrenched norms, and resistance to change continue to limit the pace of transformation.

The growing realization that diversity can equate to competitive advantage is pushing some firms to see their commitment to inclusion as a way to differentiate themselves, attract better talent, and access new opportunities. This shift in mindset may prove to be a critical driver of future progress.

We know that bias exists, but is the industry willing to confront it? As the research shows, the tools to do so are already available. What remains to be seen is the willingness to use them and to rethink the systems that have long defined venture capital.