Lifestyle

Girls just want to have funds

Date
Author
Abika Martin
Reading time
5 minutes

Group of businesswomen

At a glance

  • Approximately one fifth of British businesses are led by women, however there is a significant funding gap for female entrepreneurs.
  • Research demonstrates that £250 billion could be added to the UK economy if women started and scaled business at the same rate as their male counterparts. 
  • The reasons for funding disparities are multifaceted and can be attributed to a variety of structural barriers, such as the underrepresentation of female investors within venture capital.  

It has become something of a tradition for me to pen a contribution for The Brief for Women's History Month – with previous efforts highlighting women’s participation in financial markets, and women’s contributions to technology. This year, I am turning my attention to female entrepreneurship and it’s benefit to the wider economy.

Around one fifth of British businesses are led by women – almost a million in total. This is a growing number but has not changed significantly in recent years and remains outpaced by male founders. Just one in ten working women in the UK is involved in start-up activity, however the statistics show that female entrepreneurs are consistently outperforming male counterparts with their businesses reporting greater revenues, and double the return on investment.1 Female entrepreneurs tend to be more open and collaborative, are more motivated by flexibility and purpose and are nearly three times as likely to partner with research institutions.2

In 2019, the Alison Rose Review – an independent review commissioned by the Treasury – conducted research that found a potential £250 billion uplift to the UK economy if women started and scaled businesses at the same rate as men.3 No wonder, then, that the recent announcement from the Invest in Women Taskforce (an industry-led government-backed initiative supported by the Department for Business and Trade), pledging over £250 million in funding for female-led businesses, was widely celebrated.4 Designed to bridge the funding gap (less than one third of equity deals go to teams with at least one female founder, and all-female teams benefit from just 3% on average), this impressive figure will be put in the hands of female financiers to invest in female founders. 

However, £250 million is a modest sum compared to the £72 billion funds raised by UK companies between 2021 and 2023,5 and when considering that the UK venture capital market is one of the largest in the world (falling behind only the US and China). The announcement came shortly after a public u-turn by Innovate UK, who had initially indicated they would award just half the £4m committed through 50 grants in the Women in Innovation competition, despite receiving over 1,400 applications.6 After criticism they agreed to award the full original amount. 

The unequal distribution of financing persists, then, but the issue is clearly not a lack of capital, nor is it a lack of women-led businesses. So where does it fall down?

The answer is a familiar one; a lack of representation in decision-making. Female investors are twice as likely to invest in female-led and mixed leadership businesses. But they are outnumbered on the venture capital side of the table, comprising just 11% of committee members,7 and they also represent a minority of the UK’s angel investors at around 14%.8 There are structural barriers contributing to this underrepresentation, including regulatory criteria around the promotion of such investments, largely based on investment experience and financial position. We know that, as a collective, women earn less over their lifetime than men, and can be less engaged with financial markets, so it is perhaps unsurprising that it can be more challenging for women to meet the required criteria to invest in private markets. Last year, legislative changes to raise the financial thresholds were reversed after just a matter of months, in part due to concerns about their unintended impact on women’s ability to participate in early-stage investing. 

And of course, it is unintentional. But at a time when diversity, equity and inclusion (DEI) initiatives have come under heavy criticism, statistics such as the ones I have shared here serve as a reminder that true financial equality is yet to be achieved. The obstacles start as early as childhood, with societal norms influencing boys and girls’ impression of their relative competency in numeracy; they are perpetuated through early adulthood with a lack of female role-models in leadership positions; and they are compounded by the responsibilities of biological motherhood and the associated demands. Indeed, the World Economic Forum projects that it will take 134 years to close the global economic gender gap, with parity for women across leadership roles, workforce participation and earnings achieved,9 highlighting the need to address these barriers and support initiatives that seek to dismantle them – for future generations. 

Often, those initiatives will come from female-founded businesses. 63% of social enterprises in the UK are led by women,10 and their different lived experiences provide unique perspectives in industries like the booming global FemTech market, now worth over $50 billion.11 Investment in gender-led healthcare – a historically under-researched area, making it an untapped market – is an economic opportunity not only for investors but for wider society, reducing pressure on public services and increasing participation and longevity in the workplace. 

Beyond this, successful women are often generous philanthropists in areas like education and healthcare, as well as active mentors, inspiring innovation, acting as the role-models they didn’t necessarily have themselves. In so many ways, female-founded businesses can change the world. It’s time they received the funding they deserve, thereby creating a more equitable and prosperous future for all – and, as the numbers show, a more profitable one. 

[1] https://prowess.org.uk/facts/

[2] https://prowess.org.uk/facts/

[3] NatWest https://www.natwest.com/business/insights/business-management/leadership-and-development/rose-review-2023-new-initiatives-to-build-thriving-businesses.html 

[4] https://www.investinwomentaskforce.org/

[5] https://www.british-business-bank.co.uk/about/research-and-publications/small-business-equity-tracker-2024

[6] https://startups.co.uk/news/innovate-uk-u-turn/

[7] https://www.investinwomentaskforce.org/

[8] https://ukbaa.org.uk/our-programmes/women-backing-women/women-angel-insights-report-launch/

[9] https://www.weforum.org/publications/global-gender-gap-report-2024/digest/

[10] https://prowess.org.uk/facts/

[11] https://www.statista.com/topics/10267/femtech/

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