What gets measured, gets done

Most companies are in need of capital to be able to grow, especially if the company is newly started with only an idea in its luggage. Capital is needed to hire people who can build the company's offering. Develop a product, market it, sell it. Venture capital can almost be seen as a major nutrient injection which is a prerequisite for being able to take off the ground and also to do so relatively quickly. A car can be fantastic but will not roll without some form of fuel - whether it is electricity or petrol. The companies that do not receive external financing will probably - no matter how good their idea is - disappear.

It is often said that what gets measured, gets done. How do we then measure the conditions for pursuing innovation in Sweden?

Di Digital - private e-journal with tech focus

For a number of years now, the private e-magazine Di Digital has been publishing statistics on venture capital investments. It was only when these statistics began to be published a few years ago that it became clear to more people that investments in women's companies and innovations are virtually non-existent. Companies founded by women only receive only around 1% of the venture capital, while investments in companies founded exclusively by men receive about 90 times as much.

In the years that have passed since the statistics began to be published by Di Digital, the proportion of "mixed" companies that receive funding has increased marginally, but the statistics make no difference as to whether the female founders only have a few percent of the ownership or whether their ownership is in proportion to the male founders in the team. A company can hardly be said to have a "mixed" founding team just because a woman has one percent or two of the shares and the men own the rest. We raised this issue a few years ago with those who write about the statistics in Di Digital (the issue was also noted by Breakit earlier this year).

The goal in the future for those who produce statistics on the share of venture capital that goes to so-called "mixed" teams, should be to only classify the founding teams as "mixed" where the ownership distribution between the female and male founders is each 40-60%. Other teams that do not consist exclusively of men or women can be in a miscellanous category. Otherwise, we are only deceived into believing that it is significantly more equal in the mixed companies than it actually is and those who continue to report in a misleading way participate in preventing equal conditions to do business in Sweden. Nowadays, we would never think of calling a board "mixed" or "gender equal" just because there was a minimal share of women in the board but for startups it seems to be just fine.

Since women's innovation and the conditions for their entrepreneurship should be an important issue for the society as a whole, it can be expected that this important issue is followed up at state level. We have checked if that is the case.

Growth analysis (Tillväxtanalys)

The Swedish Agency for Growth Policy Evaluations and Analyzes (Growth Analysis, Tillväxtanalys) has the Government's task of analyzing and evaluating the state's efforts to strengthen Sweden's growth and business development.

Tillväxtanalys has been producing an annual report on venture capital investments since 2013. Tillväxtanalys in turn bases its analyzes on data/statistics that the Swedish Venture Capital Association (SVCA) has produced in collaboration with the European venture capital association, Invest Europe.

In 2020, we asked questions to Tillväxtanalys and the Ministry of Trade and Industry as to why Tillväxtanalys did not report or follow up statistics on venture capital investments in companies founded by women and men respectively, if nothing else in the light of the reviews that Di Digital has done for several years. The Ministry of Trade and Industry's reply stated that it did not have access to those statistics because SVCA did not include such information in its data. Growth analysis was commissioned to investigate the possibilities of including such statistics, but no feedback has been provided since then and there is no indication that the Ministry of Trade and Industry has pressed on this issue further to ensure that an adequate analysis and evaluation of government efforts to strengthen Sweden's growth and business development.

It can be questioned that the industry association for venture capital completely ignores the fact that their members to such an extent opt out of companies that women found when they produce statistics on venture capital. There does not seem to be any greater will to analyze these discrepancies in more depth. SVCA is, however, not alone. Not even in the EU regulations there are today indicators linked to female/male ownership when it comes to what is to be measured from a sustainability point of view when investing. The EU has "ensured" that an investment portfolio consisting of companies that are in principle exclusively owned and founded by men can still be considered a "sustainable investment" and a portfolio that seeks to increase the proportion of investments in companies founded by women is likely to find it difficult to qualify as "sustainable" on that basis alone.

Regardless of whether relevant data is missing in the material provided by SVCA, it would not have been difficult for Tillväxtanalys to, for example, take into account such information that Di Digital has produced in recent years in its analysis. In Tillväxtanalys' reports, however, it appears that there has been close collaboration between Tillväxtanalys and SVCA's analysts. It is striking that the words "woman" or "women" do not appear once in Tillväxtanalys' analysis and evaluation of the state's efforts to strengthen Sweden's growth and business development. The cooperation between an authority and an industry association whose members seem to opt out of investing in companies founded by women and also do not care to follow this up, should have attracted greater interest from those who follow up on how the state analyzes business policy efforts.

Update March 2022: Also in the newly released report for venture capital statistics from Tillväxtanalys in January 2022 there is no mentioning of the problem and no discussion on the efforts, if any, to retrieve statistics relating to investments in female and male entrepreneurs and no explanation for why the issue is disregarded. Venture Capital statistics from Tillväxtanalys.

Almi Invest, state-owned venture capital company

When we contacted the Ministry of Trade and Industry in 2020 to find out how the government promotes a gender-equal business community, they referred to, among others, state-owned Almi Invest (one of the most important venture capital players in the startup world in Sweden) and the state\'s ownership instructions to Almi:

During this year, we have tried to obtain statistics from Almi Invest to investigate how well the government's ambitions in the owner's directive are achieved. Externally, Almi Invest says that 29% of Almi Invest's investments go to women and mixed teams. It sounds like Almi Invest works very well with gender equality compared to other players, if nothing else based on Di Digital's statistics. However, we wanted to know more about what was behind these statistics and how Almi Invest works with the issue.

Considering that we know that "mixed teams" can range from one female founder only with a few percent shareholding to more equal founding teams with 40-60% women and men respectively in the team (see previously referenced article in Breakit), we asked what Almi Invest's distribution looked like.

Judge our surprise when Almi Invest replied that they did not have any statistics on how large the share of men's and women's ownership in the founding teams is, nor how many they are. Almi Invest was satisfied, with regard to the issue of gender equality, that there was at least one man and at least one woman in the team in terms of qualifying for the group "mixed teams".

We then pointed out the risk that male-founded companies are encouraged to bring in a woman also to, so to speak, better on the statistics for players as Almi Invest and that such a woman is not given a particularly high ownership share. We also pointed out that it would be very easy for Almi Invest to obtain such statistics by just asking the companies in which they invest. However, Almi Invest said that they had never heard that the companies would have brought in a woman to qualify to become a "mixed team" and that the evaluation criteria for the investments were so much broader than just the gender of the owners. They did not seem to know what Breakit pointed out - that women only have a few percent ownership in highly valued e-commerce companies where the teams are mixed. Although we like to believe investors who say they are completely objective in their assessments, there is a lot of research which tells another story.

Almi Invest finally stated that they did not have any statistics on whether the mixed teams were sufficiently gender equal. They also stated that they only collect and report the data requested by Almi's financiers (Almi Invest is state-owned).

The conclusion to be drawn from the above is probably that while the Ministry of Trade and Industry produces nice ownership directives on "gender equal entrepreneurship", they do not follow up on whether entrepreneurship is really gender equal. They are content with the fact that it looks equal for the uninitiated.

Talking about "mixed teams" gives the impression that it is a relatively even mix. Looking behind what is said, however, neither the Ministry of Trade and Industry nor Almi Invest care whether these teams consist of men with 99% shareholding and women with only as low as 1% ownership. It is enough to say that there is at least one woman and at least one man in the team for it to be "gender equal" (which the research shows that it is not).

Maybe the problem is not as big in Almi Invest as the above suggests. Maybe it's still relatively equal in terms of at least gender in the mixed teams. The problem, however, is that Almi Invest does not want to tell how it is or even produce the statistics even though they have the opportunity to do so. They themselves do not seem to see any need to know the statistics in order to conduct their business. The problem is that Almi Invest themselves do not seem to know or even want to know what it looks like. They do not seem to see it as important information and believe, like all other venture capitalists, that they base their investment decisions solely on objective and relevant factors.

Vinnova, the Swedish innovation agency

Earlier in 2021, cheers erupted among female founders and others who support equal entrepreneurship when Vinnova announced that it would begin to measure how the ownership of those applying for grants is distributed based on gender. When we were in contact with the Ministry of Trade and Industry last year, Vinnova was also discussed. The Ministry of Trade and Industry then stated that since 2018 there have been a wording on gender integration in the authority's instructions. This had led to more applications being granted where women lead projects (34%). GreenCounsel's founder, who herself led a Vinnova project a few years ago, then stated that a project that looks gender equal on the surface, does not have to be gender equal.

State aid rules prevent Vinnova from financing 100% of a project, which is why project participants must regularly contribute some of their own funding in order to receive grants from Vinnova. Vinnova sets the level for how large the grant part may be, but this level is not set in stone from a state aid perspective. It does not have to be the same for all companies that apply, but it can vary based on certain factors. If you have knowledge of the poor conditions for women to receiving external funding, you can also realize that the level of the grant component is highly relevant from a gender equality perspective in Vinnova's projects. Companies founded by women will more often have to apply for lower amounts because they lack their own funding to match the contribution from Vinnova. The lower the level of the grant component, the lower grant the women-founded companies without external financing can apply for because they simply cannot afford to match with own financing. When Vinnova now will start to collect a bit more data on the distribution of ownership among men and women from the applicants and if it is revealed that male-owned companies apply for a larger share of the grants that will not be that strange since Vinnova uses the same level of grant, regardless of the applicants' size (when gaining that knowledge, it would not be surprising, however, if many start to encourage more female-owned companies to apply for higher grants instead of analyzing the opportunities for them to do so instead of focusing on removing the obstacles for them).

Although a woman is a project manager for a project and spends half of all hours worked in a project, another project participant with many times higher total assets in their balance sheet can apply for much higher grants and thus receive much greater financial resources for the same number of hours worked. By analyzing the possibilities of raising the grant part for companies with less assets, greater gender equality could be achieved. Until now, however, Vinnova has contented itself with measuring the proportion of female project managers, which probably does not say much about how resources are actually distributed from a gender equality point of view. As a female project manager in a Vinnova project, GreenCounsel's founder herself could in practice conclude that Vinnova did not request relevant data to follow up on how the financial resources were distributed in the projects from a gender equality point of view, also seen in relation to the work effort put in by women and men and the project.

If you do not request relevant data, you can not analyze in an adequate way, which was also pointed out for Vinnova at the time when we talked with them. However, we do not know whether Vinnova has considered what data is requested in projects initiated thereafter and whether it has begun to request more relevant data.

SCB, Swedish agency for statistics (Statistics Sweden)

SCB has compiled statistics for gender equality in relation to business owners and newly started businesses. This also includes statistics on national background in certain respects.

However, the statistics only scratch the surface. It appears that men usually start more companies than women, but the differences are far from as large as in the venture capital statistics produced by Di Digital. In total, women start about 32% of all companies in Sweden according to Statistics Sweden's statistics. However, the statistics do not go into depth on how the conditions are for these entrepreneurs and important parameters are missing for analyzing the situation in an adequate manner. For example, statistics on companies' turnover would also have been needed to understand the extent to which they run a business that generates revenue. It would also have been necessary to have statistics on whether the women and men included in the statistics run their business together with other women and/or men and, if so, what ownership they have and in what forms the business is conducted.

The question that is not posed

Nowadays, with the help of Di Digital and similar initiatives in other parts of the world, we have gained visibility in a huge investment gap between investments in male and female founders' companies. However, when it comes to the question of income and customers, relevant statistics are completely lacking, while many people usually say that women need to start more "growth companies". However, this is a huge simplification of the problem. It is seldom a founder's choice whether to start a company which grows so it cracks with an increasing customer base. It is the customers who choose. And what we need to understand is both the extent of the purchasing gap (which the venture capital companies seem to confirm exists because they believe that women do not start enough growth companies), and why customers opt out of the potential growth companies that are founded by women.

Since the funding ratio seems to be so low when it comes to venture capital investments in companies founded by women, it may be assumed that investors in an assessment of the investment pipline conclude that it will be easier to make a profit on their investment if they invest money in the male-founded companies. An important factor for a company to be able to make a profit is that you have demand/customers for your product. If the company has not yet come out with its product or service, investors may instead base their decision on their belief in a business idea and the potential of the founders. Maybe the investors also can use their own contacts to help the company with opening doors and in that way contribute to a large turnover/customer influx in order for them to consider it as a good investment.

It is a little strange that some, in principle, unchallenged, can claim that the problem is that women do not "want" to start growth companies. When the problem is pasted on the women, others do not have to contribute to any solution. The message that emerges is that the women who start companies that do not receive funding are the wrong women to start companies. Other women are needed to start companies - those who "want" to start growth companies. If we only get the "right" women to start a company, everything will work out. There seems to be a purchasing gap that is not addressed and that is instead turned against women who do not receive financing.

Female founders who, to a greater extent than male founders, do not get their products and services sold will have a harder time motivating investors to invest in them. If we do not understand how the purchasing gap and the investment gap interact and the actors participating in the system are not aware of this, it will probably be very difficult to create an equal business community where the best innovations are given the opportunity to grow.

However, the willingness to analyze these problems is very low. No decision-maker seems to demand the statistics or critically examine them. People are often content with some well-worded goals regarding gender equality, but do not follow up thereafter. If you follow up, you do not request relevant information in order to make an adequate review.

The road ahead

The question we ask us is why relevant statistics are lacking and why the statistics do not seem to be in demand by those who can request them. The government itself has not pointed out the problems with the lack of relevant statistics and the Ministry of Trade and Industry seems to be a bit dizzy when the questions are asked. The authority that has been commissioned to follow up the state's efforts to strengthen Sweden's growth and business development does not even have a gender equality perspective in its reporting when it comes to venture capital.

Despite the fact that the Ministry of Trade and Industry has included various wordings in ownership directives and elsewhere about an equal business community they can also communicate in 2021 that Sweden is "second best" in innovation in the world.

Sweden is not "second best" in innovation. Possibly Sweden are among the "least bad". No one can be happy with the situation. It's just that we prefer to keep the information about how bad it is away from us.

Women's innovation is important to society. A basic problem, however, seems to be that many of us are comfortable with explanations that mean that we do not need to delve into why women's innovation does not receive any funding. We do not need their innovations - we are still "second best in the world" after all?

"What gets measured gets done"

Somewhere in society, we have collectively decided that the conditions and opportunities given to women to run growth companies are not something important to think about or to change. We have already decided, somewhere, that the problem is that women do not "want" or "are able enough" and when women are mature enough to play the game in the same field as their male equals, they can get back. Before that, we can continue to state, as on Sweden's shop window to the outside world, the state-funded and run Sweden.se, that the biggest challenge for Swedish innovation is... the weather.