Funding for female entrepreneurs falls as investors show 'unconscious biases'

Funding for female entrepreneurs falls as investors show 'unconscious biases'
Enterprise Nation
Enterprise NationEnterprise Nation

Posted: Thu 15th Mar 2018

Investment in female-led businesses remains "stubbornly low", new research has concluded.

While a record amount of cash flowed into UK start-and scale-up firms in 2017, companies with at least one female founder saw total investment fall by £1m, according to the report by The Entrepreneurs Network and Beauhurst.

As a percentage of total funding raised, the amount going to women also declined, from 14.9% in 2016 to 8.5% in 2017.

Raw data of total raised from companies without a female founder and companies with and without female founders.

There were some positive figures however with the total number of deals for women-led companies increasing from 775 to 901 between 2016 and 2017, while the highest amount raised by a company with at least one female founder almost tripled with Monica Kalia, co-founder of employee benefit firm Neyber, raising £143.5m.

Sophie Jarvis, head of the Female Founders Forum, said: "The evidence is unequivocal: there is a growing disparity in funding between male and female entrepreneurs.

"There is significant evidence to support the fact that the funding gap is influenced to a large extent by unconscious biases from investors to the detriment of women."

Studies show that female VCs are three times more likely to invest in companies with at least one female founder and in a series of randomised controlled trials by Harvard Business School, it was revealed that a female name, picture or voice cuts the odds of receiving investment.

Another study by Columbia Business School and the Wharton School showed that venture capitalists pose different types of questions to male and female entrepreneurs: men were typically asked about the potential for gains and women about the potential for losses.

Annabel Denham, editor at The Entrepreneurs Network, added: "Tackling the gender gap in entrepreneurship remains a pressing social and economic issue.

"Women are starting businesses at pace, but are failing to secure the financing required to grow - just a tenth of growing companies with revenues between 1m and 250m are run by women. Yet scale-ups are vital to UK economic growth.

"We still lack a level playing field, one that ensures female founders receive the same opportunities as their male counterparts.

"Frustratingly, women are subject to unconscious biases around funding, lack the confidence and role models to pursue careers in STEM, and are erroneously perceived as having inadequate business experience and skills, and a reluctance to take risks."

The report made several recommendations:

  • Government should more regularly convene female entrepreneurs in the corridors of power to share gender-specific barriers to scaling up

  • Government should provide more data collection with detailed drop-off rates by age for girls entering STEM

  • Government bodies such as Innovate UK should support  mentoring schemes aimed at women in business

  • The media should profile more female entrepreneurs, especially those in traditionally male-dominated sectors, with less focus on gender and more on women as successful business leaders

  • Venture capital firms should work with organisations such as the British Venture Capital Association towards promoting diversity

Enterprise Nation
Enterprise NationEnterprise Nation
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