This article is an excerpt from the Deliverable D4.2 Policy Recommendations on Inclusivity in Investment created by Impulse4Women for the FINE Project. For the entire deliverable text, please find it in the Resources area of the website.
Although institutional and policy interest in inclusive finance is growing, women, minorities, and young people remain significantly underrepresented in the European venture capital and business angel landscape. This disparity is not simply the result of personal investment preferences or limited capital, but is rooted in a series of interrelated structural, cultural, and economic barriers that hinder participation [1]. These include unequal access to financial networks, limited tailored investor education, regulatory complexity, and heightened perceptions of risk, especially for first-time investors [2].
Within VC firms, for example, homogeneity in leadership reinforces a tendency to invest in familiar networks, excluding those without prior exposure to the ecosystem [3]. Business angel communities often rely on invitation-only groups and word-of-mouth deal sharing, further concentrating access among older, wealthier men. These dynamics are amplified by broader issues of economic inequality and institutional bias, particularly affecting women of colour, ethnic minorities, and young people without generational wealth or high-status professional networks.
Understanding the nature of these barriers is critical for designing policy interventions that can effectively lower the threshold for entry. The following subsections examine the main categories of challenges that deter underrepresented groups from engaging in early-stage investment, focusing on financial, informational, cultural, and institutional dimensions.
FINANCIAL BARRIERS
One of the most persistent barriers facing women, minorities, and young people in venture capital and business angel investment is unequal access to capital. Participation in early-stage investing typically requires significant personal wealth, liquidity, and risk tolerance, factors disproportionately concentrated among older, male, and high-income individuals.
Studies show that female investors in Europe, on average, have lower accumulated wealth and are less likely to have disposable income sufficient to meet standard investment thresholds, particularly in private markets [4]. These financial entry points, often starting at €10,000 or more for angel deals and even higher for VC fund commitments, are prohibitive for many underrepresented groups [5].
Youth investors face compounded disadvantages. Not only are younger individuals less likely to possess sufficient capital, but they are also less likely to have access to financial institutions willing to accommodate non-traditional investor profiles. Ethnic minorities also experience limited liquidity due to higher average unemployment rates and lower salaries, caused and perpetuated by institutional biases and systemic racism [6]. A lack of career advancement as well as existing pay gaps creates lower income available for investment, and in a study conducted by City of London Race to Equity, 28% of ethnic minorities claimed that discrimination was holding back their careers and 48% reported that their career progression was slower than their white counterparts [7].
The result is that even when young or minority individuals express interest in investment, they are frequently excluded due to an absence of financial products designed to support lower initial entry. Wealth-based eligibility criteria and high ticket sizes reinforce a cycle in which the same demographics dominate investment opportunities, while aspiring investors are left with limited options and greater risk exposure relative to their resources [8].
There is also a geographic component to this issue. In emerging and moderate innovation ecosystems, such as Romania, Bulgaria, or Greece, the availability of angel capital is itself limited and tends to be clustered in urban centres. National capital markets in these countries are often less liquid and less accessible, meaning that even when targeted programmes exist to support inclusivity, the structural financial conditions restrict broader participation [9]. Without public-backed co-investment schemes, tax incentives, or pooled investment models that accommodate lower entry thresholds, new investors remain effectively locked out of high-growth startup financing.
If financial access remains limited to a small, elite class, the innovation economy will continue to replicate existing inequalities. Creating mechanisms to reduce initial capital requirements, share risk through public-private models, and offer tailored financial instruments for first-time investors is essential to fostering a more inclusive investment landscape across Europe.
NETWORK BARRIERS
Access to established investor networks is one of the most critical factors determining participation in VC and BA activity. Yet, these networks often function through informal, closed channels that disadvantage individuals who are not already part of elite professional, geographic, or socioeconomic circles. This disproportionately affects young people, who often lack the industry tenure or executive-level contacts needed to gain entry to investment syndicates. It also poses significant barriers for minority groups, particularly those from migrant, ethnic, or racially marginalised backgrounds, who are statistically less likely to have familial or educational ties to financial institutions or startup ecosystems [10]. Furthermore, there is an issue of trust between minority groups and investment networks due to unavailability of transparent data. For example, only 13 members of the FTSE 100 released their ethnicity pay gaps, and in these 13, wage gaps were seen as significant as 27% [11].
While high-net-worth individuals may be invited into angel networks through existing business relationships or personal referrals, first-time investors without such credentials are rarely offered the same opportunities. The result is an investment ecosystem where participation is shaped less by potential or interest than by pre-existing social capital. This limits diversity within investor cohorts and narrows the range of ventures receiving funding, especially those led by underrepresented founders who often seek support from similarly underrepresented investors [12]. While 47% of white entrepreneurs reported giving up on a venture due to inaccessibility of capital, this percentage skyrockets for those from black and mixed or multiple minority group backgrounds, at 74% and 68%, respectively [13]. This creates a harmful feedback loop, in which entrepreneurs from minority communities do not receive the funding necessary to accumulate wealth, resulting in their later exclusion from investment ecosystems.
Women face similar structural exclusion but also tend to encounter an added layer of gender bias in networking spaces, which remain male-dominated. However, data suggests that even when women are invited into investor groups, they may not experience the same degree of influence or inclusion as their male counterparts. For young and minority investors, the barrier is often more foundational: a lack of visibility into how to enter the space, who to approach, or what professional pathways lead to angel and VC involvement [14].
Some countries have begun to recognise these challenges. In France, the Netherlands, and Ireland, national innovation strategies have supported mentorship and training programmes that aim to connect first-time investors – especially young and diverse individuals – with experienced industry professionals. However, across much of Europe, the absence of structured onboarding pathways for new investor demographics remains a substantial impediment to inclusion.
SOCIETAL BARRIERS
Perceptions about who qualifies as a “credible” or “capable” investor continue to create barriers for women, young people, and minority groups. Traditional notions of leadership and risk-taking in the investment world are still tied to traits historically associated with white, male, and older professionals. This bias is especially pronounced in VC and angel investing, where early-stage decisions are often driven by personal trust and informal networks.
One study found that women entrepreneurs are disproportionately asked risk-averse, prevention-oriented questions by investors, while men are asked growth-focused, promotion-oriented questions. This difference in questioning results in significantly lower funding levels for women, regardless of performance [15]. Additionally, minority investors often face heightened scrutiny and scepticism regarding their investment decisions, necessitating them to provide more evidence of competence compared to their majority counterparts 16].
Young and minority individuals encounter credibility gaps rooted in perceived lack of experience or institutional pedigree. These biases affect their ability to join formal investment circles or be taken seriously in pitches, deal evaluation, or board-level conversations. For Black investors, in particular, low representation within VC firms reinforces stereotypes and leads to a cycle where fewer minority-led ventures are funded and fewer role models emerge in the investor community [17]. Age-based scepticism also persists, where younger investors may be viewed as lacking the maturity or judgment needed for financial decision-making. These perceptions discourage entry and inhibit diversity in investor leadership.
Societal expectations around caregiving further reinforce disparities, especially for women considering entry into investing roles. Studies show that many women are less likely to engage in high-risk financial activities if they anticipate or are already responsible for childcare and family planning. These responsibilities make time-intensive or capital-intensive activities like Angel investing is less accessible [18]. The opportunity cost of financial risk is often judged more severely for women, and prevailing gender norms still position them as primary caregivers, regardless of profession.
Improving access to childcare has been shown to directly influence women’s career advancement and participation in high-growth economic activities. In countries with robust childcare infrastructure and flexible parental leave, more women report being able to pursue entrepreneurship or investment [19]. Programmes that offer subsidised childcare, publicly funded care centres, or incentives for co-parenting can reduce the long-term conflict between family roles and financial independence. Encouraging shared parental responsibility and normalising men’s involvement in caregiving is key to broadening entry pathways for all groupsand alleviating the hidden social costs often carried by women in investment roles.
POLICY AND REGULATORY CHALLENGES
Across Europe, policy and regulatory frameworks remain a major determinant of who can participate in VC and BA investing. Yet many of these frameworks either lack specific mechanisms to promote inclusion or impose structural requirements that unintentionally exclude underrepresented groups. As a result, women, youth, and minority investors often find themselves shut out of investment opportunities, not because of a lack of interest, but due to policy environments designed with more established, high-net-worth individuals in mind.
For example, Ireland’s Employment and Investment Incentive Scheme (EIIS) offers up to 40% tax relief to private investors who support qualifying early-stage businesses. While this structure has been effective in channelling funds toward startups, it lacks tailored provisions that would actively encourage participation from young or first-time investors. Capital thresholds and compliance procedures can be prohibitively complex for individuals without prior investment experience or access to professional advisors [20].
In the United Kingdom, the Seed Enterprise Investment Scheme (SEIS) provides generous tax benefits of up to 50% for investors in very early-stage companies. However, SEIS has primarily attracted older male investors with existing financial networks. Despite the scheme’s overall success in boosting startup funding, there has again been little movement to adapt it for broader inclusion. Without lower ticket entry points or co-investment opportunities, women and minority investors remain underrepresented among SEIS participants [21].
In the Netherlands, the Energy Investment Allowance (EIA) promotes sustainability by enabling businesses to deduct a substantial percentage of green investments from taxable income. While the initiative aligns with environmental goals, it is not connected to inclusive finance objectives. This limits its potential to diversify the investor base, particularly among younger or non-traditional investors interested in impact finance [22].
In emerging ecosystems like Romania and Bulgaria, national programmes exist to attract foreign direct investment or support industrial development, such as the Romanian Agency for Investment and Foreign Trade (ARICE) and Bulgaria’s National Development Program (NDP), but few mechanisms are aimed at building local, inclusive investor pipelines. According to international investment assessments, these countries provide incentives for land acquisition, production capacity, and export infrastructure, yet offer minimal support for youth or community-based capital engagement in early-stage ventures [23].
In Malta, while various fiscal incentives aim to stimulate investment in startups and small to medium-sized enterprises (SMEs), these measures often do not specifically address the inclusion of underrepresented groups such as women, youth, and minority investors. For instance, the Seed Investment Scheme offers a tax credit amounting to 35% of the aggregate value of investments in qualifying companies, with a cap of €250,000 per annum [24]. However, this scheme lacks targeted provisions to encourage participation from young or first-time investors, who may find the investment thresholds and compliance requirements challenging without prior experience or access to professional guidance.
The absence of policies tailored to lower entry barriers for diverse investors hinders long-term ecosystem growth. Reforms should focus on lowering minimum investment thresholds, simplifying access to tax incentives, and implementing matching funds for underrepresented groups. Creating inclusive regulatory pathways is not only a matter of equity – it is essential to maximising untapped investor potential across Europe.