Female-powered businesses attract record equity investment, but at a price

Female-led businesses are attracting an increasingly large amount of equity investment but are giving up a greater percentage of their ownership than male founders, research today suggests.

Publishing its top 200 female-powered businesses report, JP Morgan Private Bank noted that female-led UK businesses attracted a record £5.05 billion in equity investment in 2021.

However, the study also revealed contrarian expectations surrounding the path to female wealth equity, their role in the UK economy and sectors in which these businesses operate.

Female founders appear to be more vulnerable to the dilutive effect of equity funding than their male counterparts.

Charlotte Bobroff, senior advisor to female entrepreneurs across the UK at JP Morgan Private Bank, noted: “The data shows us that when female founders do raise equity, they give up a larger percentage of their ownership than male founders.

“In fact, the rate at which women own less of their companies as equity investments increase is almost twice that of men, a 25 per cent reduction compared to 13 per cent. This reflects several dynamics affecting female powered businesses, including a more challenging fundraising landscape and a lack of resources, exacerbating the effect of equity financing.

“We help bridge this gap by ensuring our female clients receive the right advice from the outset, structure their wealth efficiently to ensure they are in the best position at the point of negotiations and are exposed to female investors that understand the unique dynamics they face.”

Female-powered refers to high-growth companies that are founded or led by women, majority owned by women, or have a management team that is at least 50 per cent female.

Charlotte Bobroff, senior advisor to female entrepreneurs across the UK at JP Morgan Private Bank: 'The data shows us that when female founders do raise equity, they give up a larger percentage of their ownership than male founders.'

The strength of female-powered businesses in Scotland is shown in the report, with pizza oven firm Ooni making the top 200 rankings.

The report, which is in its second year and is produced using Beauhurst’s data, analysed the 10,647 high-growth companies in the UK that are founded, led, owned or managed by women and then ranks the top 200 companies based on growth in sales, headcount and valuation.

Bobroff said: “Since publishing our first report last April, it is encouraging to see that nine of the businesses recognised last year have successfully exited from the private space - three via IPO [initial public offering] and six underwent an acquisition. Prior to exiting, these businesses raised more than £336 million of equity investment.

“Seeing these success stories is conducive to changing the landscape of entrepreneurs in the UK.”

The report showed that the 10,647 businesses were contributing significantly to the UK’s economy, reporting record sales of £84.7bn and total headcount of almost 700,000, while attracting £5.05bn of equity investment last year.

Bobroff added: “Whilst more than 30 per cent of high-growth companies powered by women reported increasing employment, more than 20 per cent over the last decade, employment growth versus men during the most recent filing period decreased nearly 42 per cent.

“Whilst disappointing, it comes as no surprise that Covid-19 disproportionately impacted women, falling at a faster pace than male employment globally.”