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Does Europe’s entrepreneurial ecosystem have an inclusivity problem?

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Ethnic minority-owned unicorns contribute €9 billion to the European economy. Yet, non-white and non-male founders are still reporting discrimination, are receiving less funding and facing more obstacles in accessing opportunities. It leaves us with two burning questions: Why is this happening and what can we do about it?

The startup entrepreneurial ecosystem is one that inherently is open to new ideas, perspectives and exploring fresh approaches. It’s one that operates on an ethos of openness and collaboration – pursuing innovation and synergy for all for generations to come. For this reason, it’s an exciting space to be in and is at the forefront of influencing our future society. 

Regardless of where one comes from, believes in, or what one looks like, the world of tech above all embraces ideas and is thriving as it supports and lifts others up, rather than diminishing. It’s now a well-documented fact that the more diverse a team is, the more successful it is and we are seeing this become a defining characteristic of the fastest-growing and most exciting startups from across Europe. We’ve also seen funds and initiatives across the continent develop to encourage this spirit of diversity and inclusion.

Just this summer, for example, Unconventional Ventures launched a €30 million fund to invest in diverse teams (those led by founders identifying as women, POC, immigrants and/or LGTBQ+) and startup Code First Girls picked up €5.2 million to empower women with more opportunities in tech.

Let’s look at the stats

There is, however, some disparity. Despite this dialogue and spirit of connectivity and inclusivity, diverse teams and entrepreneurs are still reporting discrimination and are still facing more obstacles to overcome when looking for funding. According to a report released by Cornerstone VC in 2021, only 1% of founders that receive seed funding identify as black and only 3% of VC-funded founders identify as black. In addition, as stated by investor Anna Franziska Hunger when we chatted to her earlier this year, “our workplaces are still designed around men’s needs, in a way they aren’t for women.”

As exposed in the 2021 State of European Tech Report, discrimination remains across Europe – both in terms of ethnicity and gender. While the amount of funding received by diverse teams has increased on a value level, with deeper investigation the problem is still there. Total funding for diverse teams has actually decreased as a proportion of total funding – only 1.3% went to ethnic minority founding teams.

Not only is funding tighter for diverse teams, but people are actively experiencing discrimination in the workplace. The report found that 38% of women and 56% of ethnic minority respondents have experienced discrimination whilst working in Europe’s tech ecosystem. 

So, despite all of the efforts and talk that Europe is becoming more equal, is it the case that Europe’s entrepreneurial ecosystem is still a white man’s club? We wanted to dig a little deeper.

It’s been proven time and time again that diverse teams are more impactful and more beneficial – for finances, societies, people and the environment. And there are some wonderful initiatives out there encouraging diversity to become the standard rather than the exception.

Diverse groups, though, are facing barriers to getting access to capital, they feel they are prejudiced against and put simply: discrimination is still too commonplace in the European tech community. 

More men called John have raised investment than Black women in the UK.”

Rachael Corson Afrocenchix Co-Founding Managing Director.

Promoting diversity is a win-win

This summer, the Open Political Economy Network (OPEN) launched its own Minority Businesses Matter: Europe report to look at the contribution that ethnic minority-owned businesses have made to the European economy. 

Despite the discrimination and prejudice ethnic teams and entrepreneurs face in Europe, the 800k minority businesses in the continent have a combined turnover of at least €570 billion and employ at least 2.7 million people. To put this in perspective, Belgium has a GDP of €515 billion – so clearly minority businesses are a winning bunch. Promoting diversity is a win-win and a more inclusive tech ecosystem has benefits for people and economics. 

OPEN proposes three ways that Europe can become more inclusive. This includes:

  • Corporate Transparency: For example, countries could emulate Denmark and create a public register of companies’ beneficial owners that is available to download in full for free.
  • Combat Discrimination: EU countries should collect data on the race and ethnicity of their residents, including business owners. Most EU countries – with the exception of Ireland – don’t collect data on the ethnicity of their residents, making it challenging to measure progress toward the EU’s Racial Equality Directive which bans discrimination on the basis of race or ethnicity.
  • Promote Diversity: Public authorities and large corporations should actively pursue inclusive policies that provide equality of opportunity for diverse employees, teams and suppliers. 

One thing we can confidently add here as well is that Europe’s startup ecosystem is full of wonderful, inclusive initiatives and programmes – run by people of all different backgrounds and gender identities. By taking steps, including the ones above, we can raise the visibility of these initiatives and make changes for the better.

Overcoming unique challenges

Taking these stats and thoughts into account, we wanted to find out more. So, we chatted to Philippe Legrain, Founder of OPEN and lead author of the report. 

Speaking on the unique skills and challenges that ethnic minority-founded startups are facing across Europe, Philippe told us that minority entrepreneurs face three particular challenges, in addition to those that entrepreneurs in general face. 

  • Discrimination on the basis of ethnic origin and/or skin colour
  • Disconnection from mainstream business networks
  • Doubt about their ability to succeed and place in society

Taking this into account, Philippe said:

“While these challenges prove overwhelming for many minority entrepreneurs, many others manage to overcome them, not least because they tend to have three key strengths: a burning drive to succeed, the determination to bounce back from the many challenges they face, and their diversity: their different skills, foreign contacts, original perspectives and unique experiences.”

So, how does Philippe reckon that minority businesses can be supported to reach their full economic potential?

“Tackling discrimination is crucial – and for that we need data. Yet most EU countries, with the notable exception of Ireland, don’t collect data on the race and ethnicity of their residents, let alone entrepreneurs. How, then, are we to gauge whether and where progress is being made in tackling discrimination and where greater efforts are needed? While the desire of governments such as France’s to be colour-blind is laudable, in practice it can lead to wilful blindness about the discrimination that still exists. This urgently needs to change.

“Addressing disconnection is vital too. Mainstream business networks need to do more to cater to the specific needs of minority entrepreneurs, while minority business networks can also help bridge the gap. For example, in Berlin, Deborah Choi, an African American entrepreneur and investor, has co-founded Founderland, a non-profit community enterprise to get more women of colour founders in Europe seen, visible and funded.

“As well as the capital, minority businesses need contracts. One important way in which both public authorities and large corporations can help is to pursue inclusive procurement policies that provide equal opportunities for diverse suppliers. In France, Advice (Agence pour la Diversité Entrepreneuriale) focuses on helping businesses located in deprived urban areas where people with a migration background tend to congregate. And across Europe, the new European Supplier Diversity Project (ESDP) is likewise seeking to connect minority businesses with large corporates that want to source more from them.” 

Highlight impact and enhance visibility

Minority-founded businesses, whilst being hit with extra challenges to overcome and additional hoops to jump through, are driving impact and profit across Europe. There are so many diverse founders and diverse teams that are achieving great things across Europe’s startup ecosystem. 

While it’s imperative that we keep an eye on progress, and we make sure that we continue to fight discrimination and prejudice, we also should highlight those entrepreneurs and innovators that are making change and becoming successful in the face of adversity. 

As Philippe confirmed to us, minority-founded startups are leading the way across a broad variety of sectors – especially in tech. He points to the likes of Gorillas, the rapid grocery-delivery service founded by Kağan Sümer, who was born in Turkey and Omio, an online travel app, founded by Indian-born Naren Shaam, both of which are based in Berlin, as well as Bunq, an Amsterdam-based fintech bank, founded by Ali Niknam, who is Canadian Iranian.

Philippe pointed to the fact that many minority-founded unicorns have roots in Europe’s universities. 

“Other minority start-ups are leveraging the strengths of European universities in areas such as engineering and medicine. University spinouts include Agile Robots, a Munich-based AI robotics firm, co-founded by Zhaopeng Chen, who is Chinese, and MindMaze, a Lausanne-based AI neuroscience firm founded by Indian-born Tej Tadi.”

Philippe also points to women-founded startup Xaalys as a soonicorn that’s on his radar. Xaalys is a Paris-based fintech app helping parents educate their children on the financial world. 

“Senegalese-born entrepreneur Diana Brondel started Xaalys after moving to France for her studies and then a successful career in banking. Xaalys – which means “money” in wolof, her native language – provides young people with an account in their own name and a bank card over which their parents have control, as well as access to fun financial education content.”

Keep making space

Europe has an inclusion problem to overcome, that much is clear. Reports exposing the problem, such as OPENs and the State of European Tech report can bring light to the fact, but, what needs to happen is genuine, concerted action from all levels of Europe’s tech ecosystem, including corporate players, investors and government actors. 

There are more and more female investors, more and more female-led businesses and more and more teams becoming gender-equal. The same goes for ethnic backgrounds. We need to continue this trend, continue highlighting and supporting the work already being done and listen to the inspiring voices that are already here and make space for a new generation to take to centre stage. 

Have you experienced discrimination while working in Europe’s tech ecosystem? Please get in touch with us. We’d be honoured to hear your story. 

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  • Source: https://www.eu-startups.com/2022/09/does-europes-entrepreneurial-ecosystem-have-an-inclusivity-problem/

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