Posted: Fri 3rd Feb 2023
The proportion of UK equity investments in businesses with all-female founding teams increased last year, but the overall deal value saw no change on 2021, new figures reveal.
The report by Beauhurst found high-growth companies with a female founder secured 27% of UK equity deals in 2022, up from 24% in 2021. Businesses with mixed gender founders won 18% of investments, the same as in 2021, while firms solely founded by women saw a new record high of 9%.
However, when it comes to overall deal value, the numbers showed no improvement since 2021.
Only 16% of funds went to high-growth companies with at least one female founder, and less than 2p in every £1 invested during 2022 went to all-female founding teams, compared to 85p for all-male founding teams.
The government is making efforts to boost the number of investments for female entrepreneurs, such as the Investing in Women Code, which commits funders to increasing access to finance for women-led businesses.
Progress has been made but Alison Rose, the NatWest CEO who leads government-commissioned reviews on female entrepreneurs, said women founders are still "being snubbed by investors".
Enterprise Nation member Julia Elliott Brown runs Enter The Arena and advises female founders on raising investment. Commenting on the Beauhurst report, she said:
“It's incredibly disappointing to see that the dial still hasn't moved in terms of the percentage of venture funding going to female founders in 2022. 12 years ago, this figure was 5%, and unbelievably we've seen women led start-ups get a smaller and smaller share of the pot every year.
"The gender funding gap is shocking beyond belief, and deserves far greater exposure in mainstream media and significantly more attention from the government.
"If we don't immediately provide more funding to support start-up growth to those women building the businesses of the future, we will sadly find that we’ll continue to live a world that is run for and by men for a very long time to come.
"The impact on the economy, on diversity of decision making and power, and on services and products provided to the market, will be catastrophic.
"Measurement of diversity in funding across the whole investment pipeline should be made mandatory, not just a voluntary scheme as we have with the current Investing in Women Code.
"More visibility should be given to those investors who are taking a progressive stance on reaching out to female founders, and removing bias from their decision making process wherever possible - they are few and far between, but shining a light on their endeavours and the positive results they see in investor returns will help drag the rest of the market up.
"And finally, the government should make training and development loans and grants available to support female founders in developing their skills and getting the support they need for success."
Other 2022 equity investment insights
In other findings from the Beauhurst report, investment activity saw an overall decline of 7% in 2022 compared to the previous year, with £19.7bn invested into private UK companies across 2,722 announced equity rounds.
Seed investments was the only stage to see an increase in deal numbers since 2021, despite a 13% drop in first-time fundraisings.
The report said:
"Supply chain disruptions, political uncertainty, and the energy crisis in Europe have all contributed to the challenging conditions.
"In contrast, 2021's extraordinary spike in deal volume was spurred on by unprecedented economic stimulus measures, postponed deals from 2020, pent-up capital, and low interest rates.
"Viewed in this way, the drop in investment is perhaps less dramatic than it appears. Indeed, 2022 still saw considerably more deals and pounds invested than in any year prior to 2021."
Looking at investments from a regional perspective, Beauhurst said the distribution of equity funding around the UK "has worsened".
At 72%, the South of England saw the vast majority of investments. The South East received 9% of deals, the South West 6%, and the East of England 7%.
Meanwhile, London secured the greatest proportion of announced equity deals, at 50% and up from 49% in 2021. Firms in the capital also got the majority of total funding with 69% of pounds deployed in 2022 going to London-based companies.
In comparison, businesses in the North of England secured just 12% of deals. Northern Ireland received the smallest share of equity rounds, at just 1%.
There was some positive news with Yorkshire and The Humber and the South West recording record deal numbers in 2022.