Female entrepreneurs are missing out on billions of pounds of investment due to under-representation in venture capital deals, suggests research published today.
All-female founding teams receive less than 1p of every £1 worth of venture capital (VC) investment in the UK, according to the UK VC and Female Founders report.
The study found that all-male teams get 89p from every £1, while mixed-gender groups take the remaining 10p. Based on these figures, it estimates that £5 billion of funding went to all-male founders.
At the investment committee stage of the application process, 61 per cent of VC firms didn’t see any all-female teams in 2017, with a quarter seeing no women at all.
Francesca Warner, chief executive and co-founder of Diversity VC, said: “It is shocking that nearly a quarter of VC firms did not see a single female founder at investment committee in 2017 and this needs to be urgently addressed.
“Similarly just five per cent of founding teams seen by VCs were all-female. This is disappointing and demonstrates that we have a long way to go until the industry is a place where anyone from any background can thrive and succeed.”
The research, commissioned by Chancellor Philip Hammond and undertaken by the British Business Bank with Diversity VC and British Private Equity & Venture Capital Association, aims to help the UK government identify and address specific barriers faced by female-led firms in accessing venture capital.
It cites a lack of women in sectors which are currently a key focus for VC firms, such as software, artificial intelligence and medical technology, as part of the reason they are underrepresented.
VC investment in start-ups with female founders is increasing but progress is “very slow”, the study said. Following current rates, it will take a further 25 years for all-female teams to reach 10 per cent of all deals.
Alice Hu Wagner, MD of strategy and economics at the British Business Bank, said the results are part of a wider diversity issue, adding: “Mandating female decision-makers risks tokenism; earmarking ‘women-only’ money does not address underlying closed networks and experience gaps.
“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.”
Chief Secretary to the Treasury Liz Truss said: “More women starting up businesses will supercharge economic growth. It’s incredible that in 2019 men seem to have a virtual monopoly on venture capital.
“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.”