• “It took me 12 years to realise I could simply set up my own company,” says Lisa Lang, 34, sitting in her firm’s new offices in the hip Bikini shopping mall in Berlin. This is a once self-confessed IT nerd who doesn’t “do” the conventional IT uniform of jeans, pullover and sneakers, preferring colourful outfits and red lipstick. “Surprise, surprise: you can be smart and look smart, too,” she says.
Today, her smart clothing firm Elektrocouture employs 17 people and has a turnover running into millions of euros. Smart clothing cools when it is warm or changes colour on demand. “Nobody is born an entrepreneur, it’s something you grow into,” says Lang. But women grow into it more rarely than men. Far more rarely, it would appear.
According to the latest figures from the Bonn Institut für Mittelstandsforschung (IfM), which studies small to medium enterprises, Germany has five male company founders for every two female ones. And the larger the firm, the less likely it is to have been set up by a woman. One female founder was asked by her bank if her husband would act as guarantor, and another woman was told that members of the business association she joined would now have to bring knitting needles to meetings, instead of having a chat over a beer.
According to economists from the University of Hohenheim, another 60,000 companies could be set up in Germany if women founded firms as frequently as men.
Almost half of men but only a third of women in Germany think they have what it takes to set up a company, according to a study in 2014 by the federal Institute for Employment Research (IAB). With Germans already regarded as generally cautious, German women seem to be even more so. Almost three-quarters of the gender gap can be explained by this higher aversion to risk, according to a study carried out the same year by the Centre for Economic Studies (CESifo) in Munich. This caution among German women may be related to qualifications. Although the number of female university graduates is rising, in 2015 only a third of students in mathematics, information technology, natural sciences and technology were women, according to the Federal Statistical Office (Destatis).
One of the reasons for this – as indeed for the low number of female founders – is the lack of role models. “The image of an entrepreneur is still male,” was the conclusion of a 2013 study commissioned by the economics ministry investigating female entrepreneurs in the European Union. Role models are decisive for motivation and success.
Or, taking the IAB’s figures, evaluated by the Global Entrepreneurship Monitor for Germany from 2009 to 2014: having entrepreneurial parents increases the probability that daughters will be entrepreneurs too by 48%. Support from the surrounding environment is decisive. In her career manual Lean In, Sheryl Sandberg, the chief operating officer of Facebook, argues that the most important career decision for a woman is “whether she will have a life partner and who that partner should be”.
Lang’s family home in Franconia was a working-class household and “it was actually clear that I would either be a housewife or be employed somewhere.” That all changed when she visited an uncle and aunt who ran a real estate company in Australia. “That was the first time I realised, ‘oh, company director, that’s another possibility.’” She did a course in media studies and a female professor got her really keen about IT. After her studies she worked for a various startups, and one of her jobs was to build up the Berlin office of the US cloud communications platform Twilio.
In the tech scene, there was great interest in the smart clothing she had developed. Lang realised that designing clothes for the digital age was a new opening in the market. “It was as if everybody all around me was fast asleep and I was the only one awake and spotting the potential.” She knew she had to give it a try.
According to a survey by the economics ministry, one in three men out of 513 company founders surveyed gave “being able to earn more” as a reason for setting up a business, but only about one in eight women.
On the one hand, plans to build up a firm often come to grief because of the lack of adequate childcare. On the other hand, it is precisely the wish to combine child and career that often drives women to set up their own business. Germany’s Kreditanstalt für Wiederaufbau (KfW), a development bank, found nearly one female founder in three was driven by necessity, whereas among male founders the figure was only one in four. Proportionately, more women than men set up in business simply to boost their existing income. According to an assessment by the IAB in 2015, one in four female founders would prefer to be in regular employment – if they could find a suitable job.
In 2004, when Christine Margreiter and Sibylle Stollberg searched for “waxing” online, they found no listings for Germany. Few people thought depilation or hair removal could be a viable business. “But both of us were really excited about waxing and were determined to bring it to Germany,” says Margreiter. Today their Wax in the City franchising business can boast 24 studios in six countries with an annual turnover of about €10m (£8.9m). “I think women tend more to go in for a startup because they are passionate about it, not so much because they are making cool calculations about their career,” says Margreiter.
Women can bring a different, very personal perspective to innovation, such as creating a monitoring app for menstruation, an app that finds a market for leftovers from restaurants or bakeries, or a job-sharing agency for people with part-time careers. In 2016, according to KfW figures, 31% of female founders offered services in care, education, culture or sport, compared with one in eight men. That means that there are nearly as many female as male bosses in these business areas.
“We were so carried away by the fun we were having and by our idea that we never noticed how the money was slipping through our fingers,” says Birgit Gehr, owner of Blues (Bavarian Logistics, Environment and Disposal Systems Ltd), a waste disposal and environmental management firm. After years of being employed in construction, in 2002 she set up her own company with her colleague Alexandra Wehner. She now thinks she was naive. “We made every possible mistake with the financing.”
Today, she can laugh about it and knows where she went wrong. They started out with too little capital, underestimated the need for sufficient liquidity and had to borrow money from friends and pay company bills from their own private means.
This is far from uncommon. On average, women have less capital when they take the plunge and set up on their own. According to KfW, 41% of women but only 33% of men started their business in 2014 entirely without financial capital. Only 2% of women but 6% of men drew on external funding of more than €25,000.
According to the German Institute for Economic Research (DIW Berlin), women also have fewer assets – on average, they have a third less wealth than men. A study by the IZA Institute of Labour Economics in Bonn showed that an extra £1,000 in available capital boosted the likelihood that women in Britain would launch their own startups by 8.5%.
Obtaining credit is also more expensive for women. In 2008 the Harvard economist Alberto Alesina found that women in Italy have to pay higher interest rates for comparable startup loans. A Columbia Business School investigation in 2017 came to the conclusion that in negotiations about capital, women have to talk more about the risks of losses whereas men are asked about potential profits. This leads to women being granted less money.
Researchers at the Luleå University of Technology, in Sweden, evaluated selection interviews with Swedish state-run venture capital funders: 53% of the women interviewed but only 38% of the men were refused loans. On average women were granted 25% of what they had requested, while the men got 52%. The qualitative analysis provided the explanation: the women were underestimated and the men were overestimated. The women were seen as “young and inexperienced”, “good-looking but careless”, or “too cautious”. The men were “young and highly promising”, “arrogant but impressively competent” and “sensible”.
All this comes as no surprise to Gehr. When she and her business partner attended events, they were greeted with “Ah, the Blues girls!” She wonders who would call mature businessmen “boys”. There were no such comments to be heard when the potential investors looked around the production halls: 7,000 sq metres full of machines. However, such visits were rare. Usually, the bank gave the thumbs down beforehand: the risks were too great. But one female bank employee found Gehr and her partner so impressive that she helped them get a loan from a funding agency. “To this day I am still grateful to her,” says Gehr. Today she has a staff of 20, generates annual turnover of €5m and has almost paid off her borrowings.
Female founders looking for funding usually find themselves facing men; 93% of the partners in Germany’s 100 biggest venture capital firms are male.
Gehr only had to contend with stupid comments. Elsewhere, sexism can easily turn into harassment. In the summer of 2017, more than two dozen women in the USA went public with revelations of having been sexually pestered by investors. Several perpetrators had to leave their firms as a result. Some lenders, such as the angel investor Jonathan Sposato or Cilian Jansen Verplanke of the Dutch investment company Karmijn Kapitaal, now only invest if there’s at least one woman on the team of founders. Not for altruistic motives but because, as Verplanke says, mixed teams are simply more successful.
Ingrid Hofmann, 63, remembers vividly a moment from the early years of her business. Soon after she had set up her temp agency, she was involved in creating a trade association with other firms in the same business. “As the only woman in the association, I kept the minutes at every meeting,” says Hofmann. But then at one of the sessions it emerged that her firm alone generated more than half of the total turnover of the whole association. “Since that day I have never kept the minutes again. Not for anyone,” she says. Her company, IK Hofmann, now has branches in Germany, Austria, Switzerland, Italy, the Czech Republic, Britain and the USA, recording a turnover of €836m in 2016.
Even today Hofmann rarely meets another woman at association meetings, and encounters with other women who have set up companies are even rarer. An analysis by the KfW in 2014 showed that on average businesswomen record €6,000 a month less turnover than businessmen, even allowing for limiting factors such as company size and the like. This trend is particularly marked in the higher leagues: only one company in five with turnover of €1m was founded by a woman, for firms with turnover of €50m the figure is one in 20.
Hofmann says: “I think it is more the internal barriers than the external ones that prevent women from striving to set up a really big enterprise.” Furthermore, she believes, the motives that drive women to set up small but modest firms also cause them not to consider expanding further when things are going well. Hofmann suspects that many women are not prepared to pay the price. “It is simply not easy to juggle all the demands.” Anybody running a big company has less time for the family. Women trying to combine both things have to put up with seeing their children giving the nanny a passionate hug.”
A study from Canada bears out her point: 58.5% of the women surveyed said they did not want to expand their company because they were happy with the way things were. And an analysis by KfW shows that full-time male company founders will work 51 hours a week, while women only put in 43 hours.
But perhaps once again that has to do with motives. Women who are really committed to their idea are often more interested in quality than quantity and the aim of the company might be more important than its size. Hofmann can only shake her head over such trends – she thinks being in charge is fun. “The longer you are boss, the more fun it is.” She argues that size and power too often carry negative connotations for many women. “I like the idea of providing jobs for a lot of people.” And she has done that, employing 24,500 people now.
Although only 29% of startups are founded by women, the proportion of women seeking advice from the German Chamber of Commerce is significantly higher, at 40%. What can be done to encourage more women to pluck up courage? “If more women are to set up firms in Germany, there have to be more women in the workforce generally. That requires good childcare,” says Jörg Zeuner, chief economist at KfW.
One conclusion from the CESifo study is that financial support, campaigns and coaching would be most likely to encourage more women to set up companies. But only if they are properly targeted, as the investigation by the economists in Hohenheim showed. They found that women often did not feel that apparently neutral startup support was aimed at them. “The situation looks neutral, but isn’t,” was the researchers’ verdict. Networking can also be important. The new economy and startup culture have not yet shut down the old boys’ club. Nine out of 10 female digital entrepreneurs questioned by the Vodafone Institute for a study entitled New World and Old Roles think that better access to networks would encourage more women to found startups.