Atomico’s Report on Diversity in VC Funding, and Why Does it Feel Like We’re Going Backwards?

It’s no secret that VC funding has a diversity problem. Receiving funding from venture capitalists is often the gateway to getting a company off the ground, however, VCs and founders are still muddling through a system that puts people of colour, women, and those from low economic status at a disadvantage when it comes to raising funding. This means investors could overlook talent in favour of something more familiar, potentially passing up massive opportunities for innovation and returns. In the State of European Tech 2019, Atomico and other leaders in the industry give us hard facts about diversity in European venture funding.

One of the major findings from the 1200-person survey is that capital raised by women-only teams actually peaked in 2017, and has decreased since. However it’s not all bad news: the number of companies tackling diversity issues has increased, and some sectors, such as quantum computing, have an abnormally balanced gender ratio. So why, when it feels like the discussion around diversity is increasingly present in mainstream discourse, is VC-funding for women-led companies decreasing? Why is there still such a big gap when it comes to founders from different ethnic backgrounds?

Listen to the Numbers 

The results of the survey from Atomico reveal what one might suspect, but for the sake of science and rationality, here are the numbers.


By ethnicity, the numbers show 83.8% identified as Caucasian, 0.9% as Black, African or Carribean, 4.0% as Asian, 1.5% as Hispanic, 1.6% as Middle Eastern/North African, 2.9% Mixed, 0.9% Other, and 4.5% preferred not to say. The general ethnic breakdown of the EU is not readily available due to country-specific policies about the ‘protection of sensitive data’.


The gender breakdown indicates that 77.4% of founders who raised external funding identified as male, 20.7% as female, 0.4% as non-binary, 0.2% as other and 1.5% preferred not to indicate. Per Eurostat, the European Union is home to 51% women and 49% men. While it’s safe to say that not every woman or non-binary person wants to receive funding from a venture capitalist, the history of the industry suggests that the large disparity may also be due to biases and structural inequality. 


When viewing the responders based on financial status before starting the company, 53.5% stated they lived comfortably already, 26.2% met their basic expenses with some leftover, 13.2% said they just met basic expenses, 4.9% struggled to meet basic expenses, 1.0% didn’t meet basic expenses, and 1.2% would rather not say. This is based on a sample of people who have already raised money, indicating that if you’re not already quite comfortable, you’re either less likely to raise money, or less likely to take the risk and seek funding in the first place. The numbers also show that relying on VC funding is a financially high-risk endeavour, and most who are successful were already financially comfortable before starting a company. 

News Coverage

The report named a 1% decrease down from 10% in 2018 for tech news coverage of diversity and inclusion topics. Leading topics included Fundraising and Artificial Intelligence. Could the decrease in coverage provide a false sense of relief from the topic? 


Another positive to the outcomes of the report is the sharp upturn in the number of initiatives that exist to advocate for diversity and inclusivity. There are over 100 initiatives across Europe, compared with the list of 28 published with the report last year. 

Industry Perspective

There is however strong agreement among venture capitalists, founders, and employees that creating a more inclusive European tech ecosystem is important. 78% of founders or employees stated that it was important and 84% of venture capitalists marked it as important.

Additionally, venture capitalists reported a significant effort to improve diversity in 2019. They have switched their methods of sourcing new investment opportunities, including diversifying their network of partner funds and angel investors (66% and 54% respectively), attending events with participation from diverse founders (43%), and organizing events for diverse founders (43%). However, it’s worth noting that a majority (63%) of these shifts were taken on by women VCs. 

What does it all mean, Basil?

The simple answer to the question in the introduction is that more awareness doesn’t necessarily equal progress. Certainly, it is an important part of the path to truly diverse businesses having access to VC funding, but it’s only one part. In an interview with Francesca Warner from Ada Ventures, a fund backed by Atomico specifically to fund overlooked founders, she stated that these statistics show us that ‘The correlation between the noise that’s being made about diversity and inclusion and the actual action and impact that those actions are having is not there. So more noise doesn’t necessarily translate into more investment for those companies.’ That doesn’t mean, however, that we should stop making noise, but that perhaps it’s time to place more emphasis on action. 


There is perhaps a case for bootstrapping. The data from Atomico about funded founders is further divided based on whether the company bootstrapped or raised venture capital. Several minority groups had a higher percentage of founders who bootstrapped successfully rather than raising funds. Is it possible that the VC funding model doesn’t work for people from diverse backgrounds, and they are receiving this support through other means? Based on these numbers alone, the case isn’t so strong, but it’s a possibility.

Education Gap

Others in the industry see it as a market education gap. Joanne Hannaford, Head of IT at Goldman Sachs stated, ‘We know that a relatively small percentage of women founders have access to capital. We know that one of the reasons for that is that VC firms providing capital to founders differentiate to their male counterparts because of their ideas. Women founders often have ideas which are geared around or businesses which are geared around women as consumers and those ideas don’t have the same access to capital for that very reason.’ This suggests that an increase in women VCs or VCs educated in markets designed for women could mean open doors for founders from underrepresented groups.  

A New Era for Diversity in Tech

In July of 2019, TechCrunch writer called this “the end of the beginning” for the conversation on diversity — in summary, time to move from awareness, conversation and ‘window-dressing’ diversity to truer inclusion and meaningful investment in founders from diverse backgrounds.

Other news from this year indicates a big shift in the landscape of diversity issues. According to Crunchbase, 2019 was the year in which the most female-founded unicorns were born in the United States. 

The onus remains on companies and VCs as the gatekeepers to the community to continue putting in the work to increase inclusivity in the industry. VCs need to realize that investing in diversity will help them reach their bottom lines and that their reluctance to educate themselves on these issues means missed investments. On the side of diverse founders, perhaps the key is more information and more market studies regarding the potential impact of minority-specific products. Speaking the language of the VCs, that is investment and return, may more likely turn heads than a product itself. Additionally important is building spaces within current networks for overlooked founders and investors to step into the light and change the fabric of the industry from within.

Check out the full report here.

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