Previous studies have tended to show that women have traditionally lagged behind men when it comes to entrepreneurial activities around the world. However, the recent Rose Review Progress report suggests that female entrepreneurship is increasing in the UK, with 145,200 entirely female-run businesses in 2021, up from 56,200 in 2018. This represents an average growth of 37% compared to Previous year. per year, which means that a record 20% of new companies are now led by women.
The Ambitious UK Start-Ups Report, sponsored by Starling Bank, is based on data from 1,219 applicants for 2023 UK Startup Awards which recognizes the best new companies in the UK.
It turns out that half of the start-up companies examined have women involved, either as solo founders, in an all-female team or as part of a mixed-gender team. This reflects other findings on closing the gender gap, which are beginning to be addressed at the policy level in several countries. For example, the Women-Led High-Growth Businesses Taskforce was established to support the UK Government’s overall goal of increasing the number of women-led high-growth businesses by half by 2030, with a particular focus on driving change in the delivery of growth is the capital.
Female Entrepreneurship and Venture Financing
In the world of startup funding, formal and informal venture capital can help turn ideas into impactful businesses. However, a number of studies have shown that women are not receiving their fair share of both angel funding and venture capital. The results of this study confirm this.
As for the companies that have attracted angel investment, the study shows that 60% were founded by male founders, 20% were founded by mixed-gender team founders, and 20% were founded by female founders. Likewise, 59% of startups that received venture capital were initiated by male founders, 28% by mixed-gender team founders, and only 14% of venture capital-backed companies were founded by female founders.
While the study includes examples of female founders in sectors such as medtech and fintech receiving funding from angels and venture capital funds, it confirms that gender inequalities continue to prevail in the entrepreneurial ecosystem, a finding noted in a number of recent reports, such as the rose review. While both angel funding and venture capital can signal strategic investors’ confidence in start-up business models and open doors to influential networks, mentorship and further funding opportunities, they appear to be disproportionately inaccessible to female entrepreneurs in the UK.
Broader social prejudices
While all entrepreneurs face significant challenges, the barriers that prevent women from accessing external finance often reflect the broader societal biases and stereotypes embedded in our culture. For example, there is a prevailing bias towards the image of the “typical entrepreneur,” which is often based on a male stereotype, and this unconscious bias can seep into the evaluation of investment proposals and potentially be detrimental to female founders. Additionally, the venture capital world tends to be male-dominated, which can make it more difficult for women to break into these networks, find mentors, and build the relationships necessary to secure venture capital funding. Finally, there is a belief that investing in women-led startups leads to greater risk, which, when influenced by unhealthy stereotypes, reinforces the barriers women founders already face in accessing external capital.
Increasing the proportion of women in venture capital firms
Combating and overcoming these deep-rooted biases is not just a matter of fairness, but an economic imperative that would open up new investment opportunities and promote diversified innovation. Awareness and education can promote dialogue about the value of diversity in entrepreneurship, and the venture capital ecosystem can lead to adjustments in how it evaluates potential investments.
A possible solution to address these problems is to increase the proportion of women in venture capital firms. This can lead to a more diversified view, which in turn has the potential to make more balanced investment decisions. In fact, a recent study by INSEAD scientists Kaisa Snellman and Isabelle Solal shows that women can benefit most from gender-diverse investment teams, allowing them to leverage the support and familiarity of a female investor, while the support of a male champion ensures one’s own competence woman remains the most plausible explanation for her success.
Policymakers can also implement policies and frameworks that promote gender diversity and transparency in venture capital firms, putting pressure on the entire industry to change. For example, the Rose Review has committed to increasing the pool of female angel investors from 14% to 30% of the total number of angels in the UK by 2030, through the work of the Women Angel Investment Taskforce.
Therefore, as modern entrepreneurship evolves, it is necessary to continually assess and address gender disparities in access to resources, including angel funding and venture capital. Acknowledging this and tackling the problem head-on can create a more inclusive entrepreneurial landscape that pushes boundaries and increases entrepreneurial potential regardless of gender.
