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Peer2Peer Finance News | September 23, 2019

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Female founders losing out on billions of start-up funding

Female founders losing out on billions of start-up funding
Marc Shoffman

FEMALE start-up founders receive less than 1p of every £1 of venture capital (VC) investment, research claims.

A report by the British Business Bank, not-for-profit group Diversity VC and the British Venture Capital Association – commissioned by the Treasury in 2017 to identify funding barriers – found female founders are missing out on billions of pounds of investment.

The UK VC & Female Founders report found that for every £1 of VC investment in the UK, all-female founder teams get less than 1p, while all-male cohorts get 89p and mixed-gender teams get the remaining 10p.

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The analysis found that venture capital investment in start-ups with female founders is increasing but progress is very slow.

At the investment committee stage of the application process, 61 per cent of VC firms did not see any all-female teams in 2017 and a quarter did not see any teams containing women at all.

It found that 83 per cent of deals that UK VCs made, equivalent to 89 per cent by value, had no women on the founding teams. This equates to an estimated £5bn of investment going to start-ups with all-male founding teams.

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At current rates, for all-female teams to reach even 10 per cent of all deals will take more than 25 years until 2045, the report says.

“More women starting up businesses will supercharge economic growth,” Liz Truss, chief secretary to the Treasury, said.

“It’s incredible that in 2019 men seem to have a virtual monopoly on venture capital.

“We need more investment going into start-up ventures and more women putting businesses forward. It’s in everyone’s interests that financing processes are open and meritocratic to grow the economy and make use of all the talent we have.”

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Alice Hu Wagner, managing director of strategy and economics at the British Business Bank, said simple solutions are “attractive but flawed.”

“Mandating female decision-makers risks tokenism; earmarking ‘women only’ money does not address underlying closed networks and experience gaps,” she said.

“More seriously, both approaches ignore the fact that women are not the only people under-represented in VC firms and their investments. We need new approaches to addressing these issues and this report is just a first step.”