2 November 2023

Why are there still so few female entrepreneurs?

By Katrina Sale

CapX readers need no reminder of the UK’s troubled economic situation – epitomised by measly growth figures, inflation running high, and deep seated productivity challenges. While it would be delusional to think any single fix could solve all of these stubborn issues, there are worse places to start than increasing the rate at which high-growth startups can scale within our shores. Compared to other ambitious countries the UK does a pretty good job on this front, but even here an uncomfortable truth holds us back. Women continue to face barriers to starting and growing a business. Beyond being a social failing, it’s also putting the brakes on our economy. 

Today the Female Founders Forum – a joint initiative between The Entrepreneurs Network and Barclays – publishes its annual findings on the gender funding gap. Underpinned by Beauhurst data, this is a measure of how much equity investment goes to male-led startups, female-led ones, and ones led by both. This year’s findings make for pretty dismal reading – with just 3.5% of investment going to businesses with female founders in the first half of 2023, compared to 85% which went to those with male founders. In fact, 2023 is one of the lowest years on record for the proportion of investment going to female-led startups.

We also look at the number of deals, and while the picture here gives more grounds for optimism, the headlines are still not great. Just 10% of the deals struck in the first half of 2023 went to startups with female founders, while three quarters went to ones with male founders. A grain of encouragement here is that there seem to be indicators of a better direction of travel – the proportion of deals going to female-led startups, or ones with mixed-gender founding teams, has increased from 16.6% in 2013 to 25% at the latest count. 

It’s worth noting at this point that there will be countless different explanations for these figures, and there are perfectly valid reasons why we shouldn’t necessarily expect investment to split 50-50. However, so vast is the gulf, and so stubborn is the fact, one can’t just assume it’s down to mere chance. 

Through our experiences and research over the years since starting the Female Founders Forum, we know that women entrepreneurs face hurdles their male counterparts simply do not. Our wider research – which we’ve taken stock of in our latest report – shows that these obstacles are not just limited to women raising investment, either, but extend to becoming an entrepreneur in the first place, which itself will partly explain the gender funding gap. 

Regardless of what the barriers are, our guiding mission is to campaign to get rid of them. To take one example, an issue which numerous female founders have raised with us is the exorbitant cost of childcare. Whether we like it or not, women still typically take on the majority of responsibilities when it comes to looking after children. This can force female entrepreneurs to wind down their startups, or decide not to launch one in the first place, because they simply cannot afford it. If childcare was less expensive, they wouldn’t have to grapple with this dilemma in the first place. Reforms to staffing ratios made earlier this year were all well and good, but they really only ought to be seen as a first step to bringing down the costs of childcare – and for the sake of female entrepreneurs we urge all parties to go further on this issue.

It’s not just the government that needs to do better either. The private sector has come on leaps and bounds in terms of treating female entrepreneurs more fairly in recent years, but there’s still more to do. Women in our Forum, who’ve built incredible, trailblazing companies, nonetheless tell us of how they’re treated as less capable or deserving of investors’ time and money. This is backed up by academic studies showing that investors treat women markedly differently to men – even when pitching the same business idea. 

The potential economic contribution of untapped female entrepreneurship is enormous. The Treasury estimates that up to £250 billion of new value could be added to the British economy if women in the UK started and scaled new businesses at the same rate as men do. More than that, it’s vital that women can play an equal role in the economy if their own interests are to be properly looked after – be that in artificial intelligence or healthtech. 

While our latest findings on the gender funding gap might be disheartening, they should give us all motivation to continue campaigning for female entrepreneurship.

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Katrina Sale is the Head of Partnerships at The Entrepreneurs Network, a think tank for Britain’s most ambitious founders.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.