Is the gender divide closing in Europe's tech sector?

European businesses that are led by or focused on women and female entrepreneurs have, in many respects, had a standout 2021. The amount of funding going to all-women founding teams of European tech businesses increased by nearly 80% in 2021, according to the London-headquartered venture capital fund Atomico's recent "State of European Tech 21" report.

Paired with record growth – especially in the digital health sector – and broader positive trends in the European tech sector, this development suggests that efforts to boost women's representation in entrepreneurship may finally be paying off. An increase in funds devoted to backing female-led businesses, the #MeToo movement and a greater focus on diversity within portfolio due diligence processes have all helped to fuel this growth.

For example, London-based Elvie completed a £70m fundraise in 2021 to help accelerate growth of products including their portable breast pumps while another London-based company, Peanut, which operates a women-only social network, also raised $12m in new funding. In Europe, this trend also became noticeable with femtech – technology that is focused on women's health – expected to become one of the most profitable sectors in Spain. Femtech companies creating an impact in the Spanish start-up ecosystem include Emjoy, which raised €1m in funding to expand its female-guided audio products, and Gazella, a menstrual cycle management app, which raised €13.1m.

However, the successes of 2021 are not the whole story. Despite the headlines and increases in investment levels, in 2021, only 1.1% of overall raised European capital went to all-women founding teams and 8.8% went to mixed-gender founding teams, according to Atomico. There is clearly a long way to go for European venture capital in terms of gender equality in the industry.

The femtech debate

Female technology or femtech wasn't coined as a term until late 2016, but it is now associated with a host of technologies and products that are commonly designed for women's health, including businesses focused on period care, pregnancy and childbirth, ageing and menopause, reproductive health and sexual health.

But, is femtech a disparaging term or one to use with pride? There are female founders who argue against the use of the term, citing that it labels their businesses as targeting a "female only problem" and that, instead, these businesses should be labelled as biotech or healthtech. There has been a reticence in the past to invest in femtech start-ups, which may be due, in part, to cultural taboos around women’s health and bodies and a lack of product understanding from male investors. Some female founders also say they feel belittled by the label femtech and are clear that they do not want to be treated as ticking a diversity box.

Furthermore, there have been several studies that show that machine-learning systems can easily pick up biases if their design and data sets are not carefully considered. Algorithms are rapidly becoming responsible for more decisions in our lives and are being deployed by finance providers, medical practitioners and governments. This has given rise to concern about built-in gender bias due to a lack of female voices in the tech ecosystem and its influence on machine learning.

Discussions often surround how a lack of diversity is bad for women's careers rather than how it is bad for the technology underpinning our society. This makes a strong argument for why femtech should not be seen as a niche market and should be informing technology just as many other biotech and healthtech companies do. Based on its large market size, high demand and the limited number of existing participants in this space, femtech is not a niche offering with limited stakeholders: in fact much of the technology being created might be translatable into targeting wider societal health issues that are not specific to females.

Fundraising concerns

A side effect of this historical lack of funding for femtech businesses is that their regulatory and legal landscape remains nascent. These businesses, when they are looking to grow for finance, will need to look to the existing regulatory and legal framework, which may not be suitable for disruptive femtech ventures bringing new concepts to market. It is important that there is a balance between the appropriate level of scrutiny to ensure products are safe for market vs the encouragement of innovation and growth of disruptive femtech ideas without disproportionate barriers. Meaningful progress will require collaboration between governments, customer feedback groups and industry disruptors. In the UK, initiatives such as the Women’s Health Strategy are a welcome first step on this journey.

The lack of gender diversity of funding decision-makers, who are still often majority male, remains an issue among "angel" investors – wealthy private or seed backers that play a crucial role in the fundraising lifecycle for company growth – and general partners and limited partners at venture funds. (Anecdotally, some female founders of femtech companies report on how descriptions of their products at pitch meetings have been received with raised eyebrows, sly smiles or sniggers from male investors, despite the often life-challenging issues that these businesses are trying to address.) Clearly, femtech can benefit from continued wider-industry diversity initiatives in 2022 and beyond and any positive knock-on effects these can deliver.

Future investment

The historical underinvestment in European femtech means that, with an anticipated surge of interest in the market, there is room for plenty of opportunity and growth ahead. Investment still needs to be made to fuel innovation. The technology world can expect to come under scrutiny over whether it is giving femtech the support that it requires. However, with a wide variety of female-focused businesses entering the scene in 2021, the recent wave of activity around femtech looks set to continue and, hopefully, in an increasingly supportive environment.