The Rose Review published in February 2023 reported that there are more than 140,000 all-female-founded companies launched in the UK in 2022, a number that has double in only four years. Female entrepreneurs are certainly on the rise. However, the report also revealed that female-founded businesses in the UK secure only 2.1% of venture capital funding. The British Business Bank, also reported that for every £1 of UK venture capital investment, less than 1p went to all-female founder teams in 2019, with 89p in every £1 going to all-male founder teams. This disparity stems from complex factors, including unconscious bias, limited access to established networks, and a historical underrepresentation of women in leadership positions within the financial sector. In a survey that asked women what is the reason preventing them from starting their own business, out of the women who never started their own business: 44% attributed it to not having enough savings/finances, 24% to the risk being too high, and 19% to not having the confidence, with the remaining 6% attributing to other causes.
Why fund women-led businesses
While definitively stating direct correlations between the founder’s gender and ROI for businesses remains challenging due to various influencing factors, several reports and anecdotal evidence suggest promising potential for female-led businesses and startups in the UK.
Return on Investment
Studies by Nesta (UK innovation foundation) and AllBright (venture capital firm) paint an encouraging picture:
- Nesta (2021): This report suggests that early-stage companies with diverse leadership teams, including female founders, experience higher investor returns.
- AllBright (2023): Their research indicates that UK-based female-led businesses deliver a 2.4x higher average revenue per employee compared to male-led counterparts.
Growth and Survival Rates
Reports suggest female-led businesses in the UK exhibit promising growth and survival trends:
- NatWest (2022): A study by NatWest Bank reveals that female-founded businesses in the UK are growing 20% faster than those led by men.
- Rose Review (2023): The Alison Rose Review of Female Entrepreneurship found that, despite facing funding barriers, female-owned businesses in the UK have a higher survival rate than male-owned businesses within the first three years. The report also states that up to £250 billion of new value could be added to the UK economy if women started and scaled new businesses at the same rate as UK men.
Cautions and Considerations
Similar to the broader observations, interpreting these findings requires caution:
- Causality vs. Correlation: Just like with the global data, correlation doesn’t guarantee causation. Other factors like industry, business model, and market conditions likely play a role in the observed trends.
- Study Limitations: The studies mentioned above might have limitations related to sample size, specific methodologies, or industry focus, potentially affecting the generalizability of their conclusions.
While acknowledging the complexities involved in drawing definitive conclusions based solely on gender, the presented data suggests positive indicators for female-led businesses in the UK. It highlights the importance of fostering equal opportunities and access to resources for all entrepreneurs within the UK’s business landscape, regardless of their gender. By doing so, the UK can unlock the full potential of its diverse entrepreneurial talent and contribute to a more inclusive and thriving economy.
Bridging the Gap: Empowering Female Founders in the UK
While a funding gap exists, several initiatives and strategies can help support female entrepreneurs and create a more equitable landscape:
Championing Female-Focused Funds
Several venture capital firms and angel investor networks in the UK specifically focus on supporting female founders. These specialized funds understand the unique challenges faced by women and offer not just financial resources but also tailored mentorship and guidance. Examples include The British Business Bank, The Angel CoFund, SheEO UK, Investing Women
Leveraging Crowdfunding Platforms
Crowdfunding platforms like Seedrs and Crowdcube provide alternative routes for female entrepreneurs to raise capital directly from the public. This approach fosters community support and empowers individuals to invest in businesses they believe in, bypassing traditional financing limitations.
Advocating for Policy Shifts
Lobbying for policies that incentivise investment in women-owned businesses is crucial. Initiatives like the British Business Bank’s Female Entrepreneurship Loan and the Start Up Loans Company’s Women in Business initiative offer financial support and resources. Additionally, advocating for tax breaks or loan guarantee programs specifically aimed at female-led businesses can create a more enabling environment for them to secure funding. Reports such as the Rose Review are also critical to get the government attention, the report in 2019 received positive response from the UK government which announced an ambition to increase the number of female entrepreneurs by half by 2030, equivalent to nearly 600,000 additional female entrepreneurs.
Fostering Mentorship and Networking
Connecting female entrepreneurs with experienced mentors and facilitating participation in relevant professional networks is vital. Organisations such as The Women’s Business Council, The Female Entrepreneur Association, The British Association of Women Entrepreneurs (BAWE), The Female Founders Forum, and She Means Business, and Women Mean Business. All provide invaluable guidance, connections, and access to potential investors and collaborators. Other resources on mentorship can be found on the British Business Bank website.
Raising Awareness and Collaboration
Raising awareness about the gender disparity in access to funding and the significance of supporting female entrepreneurship is crucial. Collaborative efforts between government agencies, financial institutions, and individuals can inspire wider participation in bridging the gap. There are some good resources from the British Business Bank that lists alternative funding as actions to try for female-business funding such as angel funding, family & friends, asset based lending, and Startup Loans.
Eradicating stereotypes
It is also critical to raise awareness of the invalid and wrongful assumptions and myths about women in entrepreneurship such as the female attitude to risk and other stereotypes and bias that have no facts behind them.
Conclusion
Empowering female entrepreneurs through improved access to funding is not just about individual success; it’s about unlocking the UK’s full economic potential. Recognising the challenges, supporting existing initiatives, and advocating for change can create a future where female entrepreneurs have the resources and support they need to thrive. By championing their journey, we pave the way for a more inclusive and prosperous future for the UK.
For further information on funding for startups in the UK, please refer to our article.
