It’s no secret that starting and scaling a business is tough, but for women in the UK, it’s often an uphill battle. In 2023, female-led businesses received less than 2% of venture capital. Today we're going to talk about why this is happening, and what you can do about it.
The Gender Gap in UK Entrepreneurship
In recent years, diversity in entrepreneurship has become a hot topic, and with good reason. Studies show that in 2023, female-led businesses received less than 2% of venture capital funding in the UK.
According to British Patient Capital, for every £1 of equity
investment in the UK in 2021, all-female founder teams received just 2p. In
contrast, all-male founder teams took 84p, while mixed-gender teams got 14p.
This is even lower than the 4p received by all-female teams in 2020,
demonstrating how volatile the situation is year to year.
The Invest in Women Taskforce has also revealed worrying
statistics that highlight the systemic underrepresentation of women as both
founders and investors:
- Only
11% of VC committee members are women.
- Only 1.8% of equity capital is allocated to female-founded businesses.
These figures paint a bleak picture for women aspiring to lead high-growth companies or pursue careers in venture capital.
Why Is This Happening?
While the data illustrates the urgent need for more funding
and support for female entrepreneurs, the bigger question is why this gap
persists, and what can be done to address it.
A significant factor is unconscious bias within venture
capital investment teams. Historically dominated by white men, these teams
often favour entrepreneurs with similar backgrounds. As a result, male
investors are more likely to back male-led start-ups. Women entrepreneurs also
frequently encounter tougher questioning and greater scrutiny during pitches,
making it harder to secure funding.
Another issue is the lack of regulation around diversity
reporting within the venture capital sector. While some firms voluntarily sign
up to initiatives like the HM Treasury’s Women in Finance Charter and
the British Business Bank’s Investing in Women Code, they aren’t
legally required to disclose their team demographics or the breakdown of the
founders they invest in. This creates concerns that only “enlightened” firms
are participating, leaving many others out of the conversation.
On top of this, female founders often struggle to access the
finance, networks, and business support needed to succeed. This creates a
vicious cycle, with women continuing to receive less funding and the UK falling
behind global competitors. In the US, for example, women own 40% of all
businesses.
Why Closing the Investment Gap Matters
Addressing this disparity is not just about fairness, but an economic imperative too. According to The Rose Review, if women started
and scaled businesses at the same rate as men, it could add up to £250 billion
to the UK economy.
What’s more, female-led businesses have the potential to create millions of jobs and drive innovation. In 2023 alone, over 22% of all patents filed in the UK came from female-led enterprises. Supporting women entrepreneurs is about unlocking untapped potential that benefits everyone, including the UK economy.
What’s Being Done?
One leading initiative tackling this issue head-on is
the Women-Led High-Growth Enterprise Taskforce. Chaired by Anne Boden, former CEO and founder of Starling Bank, the taskforce is working to dismantle barriers and
provide women with greater access to the capital they need to thrive.
So far, the taskforce has secured over £250 million to
support female founders in the UK and been backed by major organisations like
Barclays, M&G, Morgan Stanley, and the British Business Bank, as well as
Chancellor Rachel Reeves.
The taskforce is working tirelessly to support female-led high-growth business and increase access to capital and support for female entrepreneurs across the country. A great initiative that many are pleased to see.
A key part of their work includes identifying female fund managers who will allocate funding through the upcoming “Women Backing Women” Fund. The application process is currently underway (and still open) and the selection process will take place at Mansion House later this year.
Five Tips for Securing Capital
While the landscape is challenging for female entrepreneurs,
there are several steps you can take to improve your chances of accessing funding and
support. Here are five tips that the British Business Bank says that you can do to secure capital for your new venture:
1. Be prepared
Create a comprehensive business plan and prepare detailed investment documents, including a robust cash flow forecast covering the next 2–5 years. A well-structured pitch deck is also essential to communicate your vision clearly. If finance isn’t your strong suit, seek advice from an expert.
2. Know your numbers
Investors want to see that you fully understand your business and its financials. Be ready to discuss your competitive landscape, projected growth, and potential exit routes for equity investors. Raising finance can be a long and demanding process, so ensure you’re prepared for the journey ahead.
3. Refine your ask
Request the funding your business genuinely needs to grow. Asking for too little could mean needing additional rounds of investment sooner, which can be costly. Investors typically want to see plans that cover the next 18–24 months, supported by accurate forecasts. And if you’re turned down, don’t give up, ask for feedback and refine your approach.
4. Find the right investor
Look for investors who align with your vision and goals. The right investor can offer more than money. They can provide access to networks and valuable expertise. Research investors who have a track record of supporting female-led businesses, including female-focused funding sources.
5. Build your network
Surround yourself with people who can support and champion you as you grow your company. A strong network can make all the difference, especially when raising investment. Reach out to connections on LinkedIn, attend sector-specific events, and seek out like-minded individuals who understand your journey.
Author: Ella Bramhall
Please note that these views are entirely my own and do not reflect any endorsements or affiliations.