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December 13th | #54

This week in Europe: Diversity in European Tech

Last week, Finnish Prime Minister Antti Rinne resigned over criticism from within his coalition government of the handling of a postal workers’ strike. 

On Tuesday, Sanna Marin was sworn into office in his place, becoming the world’s youngest prime minister. As a result, Finland’s five coalitions are led by women, all but one of them under 35.

This week, UK-based Ada Ventures, announced a 34 million fund "aimed at super-charging diverse global founders."

These two events, and the ensuing media coverage on diversity that followed, triggered today’s piece.

Why?

Here’s a “hot” take I’ve heard a million times: Europe has a diversity and inclusion problem. It’s the cool thing to say in 2019. 

What I’ve never heard is a clear explanation of why the current state of European diversity is a problem and precise criteria and action steps for improvement. 

Saying something is a problem, not explaining why and then doing nothing about it is not something I’m a fan of. So today I’m going to take a stab at analyzing the diversity problem in European tech.
Friendly warning: Diversity is a heated topic. I enjoy a good debate and being proven wrong so if you don’t agree, hit reply. But if you are going to get offended and stop reading halfway through, you might as well unsubscribe now.
Still here? Cool. Fasten your seatbelts.
 

Let’s start with the facts

Let’s get something out of the way: European tech is a male-dominated industry. There’s no way around it. The data is as clear as data can be. 

It is a fact that more men fund startups than women. Not only that–startups funded by men also receive, by far, most of the available VC money. Although 2019 has, so far, been the second-best year for investment into startups with a female founder or co-founder, men still take around 76% of all VC money.
Source: 2019 State of European Tech
When it comes to high-level employees, according to Silicon Valley Bank’s report, just 56% of startups have at least one women in an executive position, and only 40% have at least one women on the board of directors. Half of startups have no women in leadership positions. 

On a more general note, only 16% of software engineers are female and around 75% of the people actively working on computers are male. 

But facts – at least what you and I know as facts – on their own don’t pose a problem. 

If I tell you a half a forest burnt down, you’d be outraged. But if I then tell you the fire was kindled by professionals as part of a plan to revitalize the forest’s soil and prevent future disasters––well, isn’t it just fascinating that sometimes half the trees have to burn in order to save the other half, and the ecosystem they’re a part of? 

You need to go a step further, analyze the consequences of those facts, and explain why they are problematic in the current context. 
 

Nurses and truck drivers

Let me ask you a question: does truck driving have a diversity problem? What about Alaskan crab fishing? And electricians? Maybe nursing? Education administrators? NBA players?

All those professions are heavily skewed towards one gender (or race): Construction is primarily male, nursing is 89.2% female, the NBA is 74.4% black, and modelling is 67.4% female. Truck driving is 96.7% male and I don’t see any Twitter threads about it.
Source: US Census Bureau, but the same happens in Australia, Switzerland, and Scandinavia.
In fact, many professions skew toward one gender. What I can infer from that data is that certain professions are less diverse. 

But do they have a diversity problem

The truth is that I don’t know, and I’m not willing to assume it. That’s a hell of a logical jump. One thing I’m certain of: the fact that a population is less diverse doesn’t make it a problem per se.

Going back to construction workers. There’s a reason why construction is heavily dominated by men: men have, on average, a stronger upper body. 

Are some women stronger than men? Abso-fucking-lutely. I’ve seen Sara Sigmunsdóttir snatch more than most men can deadlift (and it's damn impressive). But if you pick a man and a woman randomly from the current population, it’s more likely that the man is the stronger individual.

This, like most things in life, goes both ways. There’s a reason why most nurses are female: women are, on average, more caring. 

With all that said, I do think European tech has a diversity problem. But not for the reasons you might think. I briefly touched on the subject a couple of weeks ago, but I’m going to expand on it.
 

Defining the diversity problem

Let me ask you another question – is something preventing the best who want to rise to the top of the European tech industry to do so, regardless of who they are?

Absolutely. When a population is heavily skewed towards a trait, it makes it harder for the non-possessors of that trait to get in. 

Two reasons:
  1. People don’t like unfamiliarity. Unfamiliarity used to be dangerous for us back in the hunter-gatherer days. Even deadly. So we are wired against it.
  2. People pattern match. We all do that and tech workers aren’t an exception. On a basketball game, would you pick the tall, black guy or the white guy? 

Although some people might, I’m not arguing for diversity for diversity’s sake. My approach is a bit more pragmatic and practical. 

The issue with the lack of diversity in European Tech is that the ecosystem would benefit greatly from including the people its currently preventing from entering it. By blocking access to a certain percentage of people – whatever their gender, race, sexual identity – European Tech is missing out on growth and potential. 

Whether it’s due to malice or stupidity, the blockers are there and they prevent us from growing as fast as we could grow.
 

In which way would Europe benefit?

First, diverse founders solve diverse problems and discover untapped markets. They solve problems no one else is solving because those other people haven’t faced them. You won’t invent a shaving blade for dark skin, a community for women or microloans-as-a-service for undocumented migrants unless you are deeply familiar with those issues.

Second, diverse groups lead to better business decisions. Good business decisions are usually the product of three things: 1) a strong understanding of the scenario; 2) risk minimization and 3) a creative or seemingly unorthodox approach. A group with a diverse make-up, by definition, has a higher chance of covering these three key points. The more different each individual in your team is (as long as they get along and can work well together), the better chance they’ll see opportunities and issues that other people in the team do not see. The same holds true at the ecosystem level.

Third, diverse founders are underpriced assets. If you have two equally performing assets, but you can get into Asset B at a lower price because it’s harder to identify and access it, then the smart thing would be to try to hack access to that asset.

Here’s an edition I wrote a couple weeks ago.
“It’s extremely important for us an ecosystem to fix diversity because not investing in women or underrpresented founders is just fucking stupid. That’s a good enough reason to me. But if it’s not enough reason for you, I also think that minorities target solve problems most people don’t understand and build companies that wouldn’t get built otherwise. And I’d like those companies to be built.”
In short, I want European tech to grow, and I think it will grow faster if more underrepresented people started or joined tech companies. 
 

The courage to understand and solve the problem

When on Wednesday, Ada Ventures launched their $34m fund to invest in overlooked founders, I was thrilled because what they are doing is brave as fuck. 

Check Warner and Matt Matt Penneycard did something most people never do: they came up with a bold thesis, and bet their asses on it. It took them 17 months, talking to 330 limited partners, tweaking the pitch deck 114 times, receiving 125 ‘No’s, taking 62 flights––but they did it.

Their mission says it all:
"Bold Investment for overlooked founders and markets. Bold ideas are the ones that change the world. They're ideas that find something completely new, flip categories upside-down, or see the world from an entirely different perspective. Our focus is to discover and build the possibility of these bold ideas, and provide investment to support the incredible founders behind them. Whoever and wherever they are."
On top of that, we kind of agree on what the problem is and how to solve it. First, diverse founders solve diverse problems. Here’s an extract from their announcement in Sifted:
“The over 65 category is the fastest growing of any in the world, yet so little money has been invested in good solutions for that population,” says Warner. Products and services for women have also been in short supply for a long time but that’s finally changing. “Femtech has become a category in its own right recently,” she adds. Several of Ada’s investments so far, including female sexual self-care startup Ferly and female sexual health company Juno Bio, fall into this category. 

It’s not fair that these customer groups have been overlooked for so long — but that wasn’t a message that the people Warner and Penneycard were trying to raise money from responded to. “That seemed to resonate less well than when we talked about missed opportunities,” says Warner.
And second, diverse founders are underpriced assets. Another extract from the same article:
“Venture is all about outliers, looking where other people aren’t looking, finding something at a lower value than the market prices it at. All of our investors want to make money: we put it into their language, and that unlocked people’s enthusiasm.”
This is a unique opportunity to put up theories against reality. If funds like Ada Ventures outperform Atomico, then more and more “funds for overlooked founders” will pop up until the “underrepresented” edge is no longer an edge (or a problem) anymore. 

Only time will tell. The only remaining question is - what’s the “goal”? When will diversity be “fixed”? When we have an exact split in founders, employees and VCs for all genders and races? 

I hope that day never comes.

Diversity will be fixed when everyone who wants to get into tech is able to get in. Equality of opportunity as they say. But it will never be a 50/50 split along racial, gender or sexual terms–regardless of how you group the population. 

When people are left to their own accord to make their own choices, they choose differently. And I’m glad that’s how it is. I like diversity.
📰 COMMUNITY NEWS
Ada Ventures launches with a $34M fund aimed at super-charging diverse global founders

London-based Ada Ventures has now announced that it aims to address diversity with a new $34m (£27m) fund, designed as a “first-cheque” seed fund.


Peregrine Ventures raises more than €103 million for its fourth fund, to invest in MedTech startups

Their partners include some of the leading institutional and private equity investors from Israel, the United States, Europe and Australia. 


Refocusing on relocation, Jobbatical launches new offices in Spain and Germany

Last year, Jobbatical began to refocus its platform on powering relocation for workers at companies, and now its new strategy is coming into focus with the launch of the company’s new offices in Spain and Germany.

📕 GOOD READS
Inside La French Tech

Government organisation French Tech Mission is leading the way in Europe with its support package for startups. But why does it bother — and is it working? Amy Lewin meets director Kat Borlongan to find out.


A Framework for Regulating Competition on the Internet

A fantastic Stratechery piece on platforms vs. aggregators, and how we should think about regulating the internet.  


Start-ups fall for Barcelona’s tech hub allure

Labour costs, international connections and quality of life have raised the city’s profile. If you are interested in cities, you should also read this post by David Perell.


Germany’s tech scene lacks lure of stock options

Stakes in start-ups are much more than a nice benefit — they’re the principal currency.

💰 MONEY STUFF
  • wefox Group closes $235 million Series B to continue insurtech’s global expansion
  • Berlin-based CoachHub snaps up additional €3.6 million, bringing 2019 total raised to €18.9 million
  • Paris-based Yubo raises $12.3 million to continue growing its Gen Z social network around the world
  • Dutch fintech Floryn raises €60 million debt to triple its alternative lending for SMB
  • Helsinki-based Sulapac raises €15 million to become the number one sustainable material replacing plastic
  • Paris-based Outsight raises €18 million to develop first 3D Sensor camera for cars, drones, airports and more
  • French e-grocery app Jow raisehttps://techcrunch.com/2019/12/09/jow/s $7M additional funding
  • Portify raises £7M Series A for its fintech app for ‘modern’ or gig economy workers

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