Closing the gap: Funding the Future of Female Entrepreneurs
Why Female Entrepreneurs Matter
Despite evidence to show that female-led companies tend to outperform their male-led counterparts, a persistent investment gap exists within the UK economy. Today, only 19.1% of active companies are female led, and these lack the funding they need to be able to thrive and grow. The gender investment gap should not be dismissed; exploration into its roots, causes and resolutions not only plays a vital role in furthering gender equality but is also critical for promoting economic growth.
The Economic Case for Investing in Women
Research shows that female-led companies generate 35% greater returns than those run by men; their potential is not to be overlooked. Female leaders offer different perspectives, drive innovation and build resilience and adaptability. If women and ethnic minority groups were granted the same investment opportunities as men, 13% could be added to the UK market – a true economic gamechanger.
Barriers to Funding Female Entrepreneurs
This lack of funding can be largely attributed to three main reasons:
Confidence: Studies show that women lack confidence in pitching for funding and underutilise their ability to borrow.
Biases: Unconscious or conscious biases from male investors in UK venture capital (VC) firms can disregard female investment and hinder diversity.
Risk: Women tend to exhibit more risk-averse behaviour than men, due to greater financial caution.
Although these factors cannot be said to be the definite and only reasons for this gap, they are among the most significant and evident.
Progress So Far: Initiatives and Investments
The creation of the Invest in Women Taskforce in 2024 was a monumental moment for female entrepreneurs. Surpassing their initial ambition of an investment pool of £250 million for female-led and mixed businesses, this Taskforce has been widely successful. The annual Invest in Women Code provides insights into what action has occurred and proposed reform.
Additionally, this Summer, the government:
Committed to a £400 million package to back investment fund managers from underrepresented backgrounds.
Invested £50 million for female-led venture capital funds, doubling the British Business Bank’s commitment to £100 million.
Although these initiatives demonstrate progress, far greater effort and structural change is needed to close this gap.
The Road Ahead: Bridging the Gender Investment Gap
An initial, and perhaps most evident, call to action would be to expand targeted investment funds for women and minority led businesses. The Invest in Women Code Taskforce found that there is the opportunity for £250 billion to be added to the UK economy if female-led businesses grow and scale at the same rate as men. Even the smallest increase in the investment pipeline could have a direct influence on the growth of the economy.
A change in the operation of VC’s would also help. An increase in diversity within senior investment teams alongside connection of female entrepreneurs to female-led VC funds and investors would help eradicate this disparity. This would promote not only short-term change, but long-term, structural reform.
A final proposed reform would be the augmentation of pre-existing initiatives. The strengthening of the Invest in Women Taskforce would provide greater access to capital, along with increasing visibility and building connections between female-investors and entrepreneurs. Another initiative by the British Business Bank’s Community aims to grow CDFI lending to businesses from £102 million to over £500 million by 2029. If this initiative is endorsed and promoted, then there is great potential for significant female investment and contribution to the government’s mission for economic growth.
Closing Remarks
Bridging the gender investment gap is key to unlocking the UK’s full economic potential. Targeted funding, promotion of initiatives and diverse venture capital can drive growth and innovation. Empowering women is one of the smartest investments the economy can make.
