Estonia, a European startup nation with the highest amount of VC investments per capita, keeps further developing its supportive business environment to hold its position. Among other things, it contains working on inclusivity and doubling down on diversifying the tech industry.
In support of those efforts, Invest Estonia organized a panel discussion in Amsterdam, gathering VC operators to talk about diversity, equity, and inclusion. It’s time to act, step out and make a shift here, found the speakers: Sarah Finegan, Director at Antler, Janneke Niessen, a serial entrepreneur, angel investor and co-founder of CapitalT, Liina Laas, Head of Expansion CEE at HR-unicorn Deel and founding partner at The Better Fund, Herman Kienhuis, founder and managing partner of Amsterdam-based VC firm Curiosity and angel syndicate River Venture Partners, and Käthe-Riin Tull, a co-founder and recruitment partner at TalentHub.
Stepping up for the changes
The venture capital (VC) industry has been known for its homogeneity for far too long. According to recent data, only 1% of capital raised in 2021 was raised by women in the CEE region, and just 4% of total VC capital went to diverse teams.
This means that a staggering 95% of the funds went to companies founded solely by men, said Liina Laas. “Imagine how much better those companies might be if they were able to engage someone else as a founder?” she asked. Her venture vehicle, The Better Fund, is specializing in helping female founders and gender-balanced teams in Europe get access to capital.
While the industry has been traditionally stubborn to change, the need for increased diversity has never been more pressing. Diverse teams lead to better decision-making and, ultimately, more successful investments, and inclusion not only makes good ethical sense but also helps attract and retain top talent.
“Diverse teams make better decisions, resulting in better performance. The reason might be simple as they combine more perspectives on each issue. But what’s also important, if we allow everyone to participate, it creates a better, more equal society,” Herman Kienhuis said.
To catch up, Europe as a whole should work much harder, said Sarah Finegan. Relocated from London to Berlin in 2021, she finds founders conceal their gender (LGBT) identity before raising funds and sees a staggering inequality of capital allocations. “The VC industry to date has been slow to invest in a diverse range of founders. This is a pan-European problem but one that seems particularly pronounced in the German tech ecosystem. There is a diversity issue in the tech and startup community. The share of female founders in Germany is just 20%, with only a handful of women entrepreneurs at the helm of German tech unicorns,” Finegan noted.
Diversifying in practice
“1% is in no way a reflection of the quality and quantity of female founders, founders of colour, and people in general, that are not white men,” Janneke Niessen advocated.
So, what can be done to bring more diversity to the VC industry?
First and foremost, it starts with employer branding that showcases your internal diversity and inclusion values. The image you create on your website, the content you write on LinkedIn, and even the wording you use are all key to attracting more diverse talent. When it doesn’t come naturally at first, start using the Gender Decoder tool to ensure the language you use is inclusive. This can be a major draw for candidates who are looking for a workplace that values diversity and inclusion. All of that should vastly increase the available pool of talent and raise the bar for building a diverse team.
Talent retention requires steps to ensure that your workplace is inclusive indeed. If the team’s attitudes and subconscious can become an obstacle here, then you can start changing them. By providing unconscious bias training to your team and raising awareness of the mental shortcuts that can lead to unfair judgments or discrimination. By becoming aware of your biases, you can work to create a more inclusive workplace where everyone feels valued and respected.
In Estonia, diversity is in the wind of change
Estonia is eager to take the lead in the diversity change in the VC industry.
“Tech companies in Estonia are thinking more and more about diversity, even though the process is still in its early stages. So do VCs — I’m advising them to push more content about diversity, write in detail about the investments they have done and apply more efforts to battle the problem,” says Käthe-Riin Tull.
To get more investments in female-founded startups, you first need more females working in startups and gaining experience and more female-founded startups to intervene in investment distribution.
Just in a few years, the number of Estonian female founders has increased from 10% in 2020 to 17% in 2023, which is currently 2% higher than the world’s average. The diversity process in Estonia began in 2020 when Estonian female founders created a community to support females in starting businesses.
“Despite there being a number of powerful women in the startup community, the ratio of men to women founders in the Founders Society is about 9:1. This circle needs to be bigger and more diverse. We can achieve this by empowering both current and future female founders to fulfil their potential,” Triin Kask, the Founders Society board member and co-initiator of Female Founders Meetup, said back then. Today, the Estonian Female Founders Meetup is an active community to gain knowledge, share inspirational stories, network and connect.
In terms of women working in startups, Estonia is relatively well-balanced. In Estonia, 40% of startup jobs are held by women, which is 13+% higher than the world’s average. However, the perfect balance still has some way to go.
Accelerating the inevitable
All the participants of Amsterdam’s diversity meetup agreed that the VC industry has a long way to go in terms of diversity and inclusion. Luckily, there are steps that can be taken to accelerate the shift, summarised event moderators Kaari Kink, an Estonian-based VC and an associate at Superangel, and Pieter Poppelsdorf, Invest Estonia’s Business Development Director in Benelux.
By keeping a diversity balance in sight and making changes in employer branding, unconscious bias training, and measuring success, the startup industry can move towards a more inclusive future where everyone has an equal opportunity to succeed.
If you want to contribute to a more diverse future and invest in Estonia, book a time via our e-Consulting and get started!