A report from the Female Founders Forum – with a foreword from Rt Hon Liz Truss MP – reveals that while the percentage of deals to female-led teams slightly dipped in 2018, female-led businesses represent a growing share of investment activity and receive similar rates of follow-on funding.
Female-founded startups are receiving a growing share of investment. In 2011, 11% of startups that raised equity investment were female founded. By 2018, this figure had nearly doubled to 21%.
Of the 6,147 investment deals made in 2018, 17.9% went to companies with at least one female founder, down from 18.2% in 2017.
Nonetheless the total amount invested in businesses with at least one female founder in 2018, as a percentage, was 11.4%, up from 9.9% in 2017.
Using data from Beauhurst, we find that female-founded businesses also have similar rates of follow-on funding. Once they received an initial investment , female-founded startups were just as likely to raise additional rounds of funding compared to non-female-founded firms (52% vs 51% for startups without a female founder).
Of the 19 high-growth companies that have floated on the stock market since 2011, three (or 15 %) were female founded. Of the 665 high-growth companies that have been acquired since 2011, 53 (8%) have at least one female founder.
Though we find women-led businesses securing investment in all sectors, they are over-represented in some sectors (industrials), and under-represented in others (tech and IP-based businesses), relative to all equity-funded startups.
In a foreword for the report, Rt Hon Liz Truss MP, Minister for Women and Equalities, says: “We have made great strides. I hope and expect that a decade from now, we will look at how far female entrepreneurship has come.”
In March HM Treasury found that the gender gap accounts for approximately 1.1m missing businesses, which equates to a £250bn opportunity for the UK economy.
Female VC partners are three times more likely to invest in companies with a female CEO, but Diversity VC has revealed that 83% of VC firms have no women on their investment committees.
Here and Now: Making the UK the Best Place in the World for Female Founders, a new report from the Female Founders Forum (a joint Barclays/The Entrepreneurs Network project), finds that while in 2011 just 11% of funding went to firms with at least one female founder, by 2018 this figure had grown to 21%. Further, female-founded businesses have similar rates of follow-on funding – reversing any perceptions that women are a less bankable investment.
Once funded, the percentage of women-founded startups that raised additional rounds of capital was similar to non-women-founded firms (52% vs 51% for startups without a female founder). Among startups five or more years on from their first raise, female founded startups were more likely to have secured a second funding round (66.5% vs 62.8%) and marginally more likely to have secured a third funding round (42.8% vs 41.8%).
This makes sense: at the early stages where venture capital firms make their initial investments, there is limited rigorous, objective information available. It means the founding team comes under great scrutiny, and there is a risk that gender bias can play a decisive role in who receives investment. As investors get more information, however, unconscious bias is less decisive.
The five highest raises with a female founder in 2018 were Orchard Therapeutics (£117.5m), MADE (£40m), Hyperoptic (£38.6m), Darktrace (£38m) and COMPASS Pathways (£35m).
The Gender Gap
The report draws on other evidence that finds one in five businesses is created by a woman, that funding rates for all-female teams are still abysmal (these firms receive just a penny in every pound of VC investment) and that male-led businesses are five times more likely to achieve £1m+ turnover. Women tend to be less concerned with expanding their businesses and are over-represented in service industries.
Though we find women-led businesses securing investment in all sectors, they are over-represented in some sectors, and under-represented in others, relative to all equity-funded startups. They are less likely to be tech or IP-based businesses (27.9% vs 32.9% for all equity-funded startups) but more likely to be involved in the category of industrials (21% vs 15% for all equity-funded startups). Within the category of industrials, female-founded businesses are twice as likely to be involved in clothing (3.1% vs 1.5% for all equity-funded startups) and significantly more likely to be involved in food and drink based enterprises (10.5% vs 5.7% for all equity-funded startups).
In a Foreword to the Report, Rt Hon Liz Truss MP writes:
“It’s completely wrong that 50% of the population are not being fully utilised, they’re not having their talents used, and they’re not contributing as they could do to our fantastic economic success story. It's important to speak out against inaccurate stereotypes and celebrate the great female-founded businesses like HyperOptic and Darktrace. I commend this report and the ongoing work of The Entrepreneurs Network and Barclays on the Female Founders Forum."
Annabel Denham, Head of the Female Founders Forum, says:
Though there is undeniably work to be done to level the playing field and tackle unconscious bias, by dwelling on the negatives we risk missing how far we have come. We can now reveal that funding rates are similar for male and female-led businesses, dispelling the myth that female founders are a less bankable investment. Ensuring women-led businesses start and scale is vital to our economy and society. We need more investment to pour into these firms, more female networks, and many more role models to inspire the next generation.”
Juliet Rogan, Head of High Growth and Entrepreneurs at Barclays, says:
“The opportunity is clear – if we create an environment where women start and scale businesses at the same rate as men, we could add nearly £250 billion to the UK economy. At Barclays we are committed to helping make this happen. We have the trust of 24 million customers and nearly one million businesses, and inclusive UK economic growth is essential for our success. We are a proud signatory of the Investing in Women code, and we are committed to providing all the support and resources needed for female entrepreneurs to thrive.”
Here and Now raises a number of issues for policymakers, schools, the media and others to consider.
Government should open the doors of Number 10 and Parliament to female entrepreneurs and formally validate their efforts.
Government should gather more data on STEM drop-off rates, examine the role of socialisation in the STEM disparity, and ensure careers guidance informs and tackles gender stereotypes.
Schools must instil the right skills, financial literacy and self-belief in young girls from school age so that they may become the entrepreneurs of the future.
The media must continue its efforts to shine a spotlight on the barriers to female entrepreneurship, profile those women in male-dominated industries, and ensure others get the role models they need to start and scale up.
Venture Capitalists could continue to work with organisations like Diversity VC and consider training programmes to tackle unconscious bias.
The report features three case studies: Tania Boler (Founder – Elvie), Alexandra Daly (Founder – AA Advisors), and Tugce Bulut (Founder – Streetbees). All are available for interview.
Tania Boler, Co-Founder, Elvie
Elvie – which is behind the kegel trainer and silent breast pump – was recently listed as one of the UK’s Top 100 fastest-growing businesses. “When raising money, bear in mind that you will need to work with these individuals for a long time. You need to be sure they are right for you – not just the other way around.”
Tugce Bulut, Co-Founder, Streetbees
Turkish-born entrepreneur Tugce Bulut founded AI market research company Streetbees in 2015. It was recently listed as one of the UK’s Top 100 fastest-growing firms. “We must teach children entrepreneurial skills from the start. I cannot stress enough how important it is to learn how to take risks and cope with failure.”
Alexandra Daly, Founder, AA Advisors
AA Advisors was founded in 2007 when Daly decided to apply her skills and knowledge, acquired during a career working for some of the largest global investment banks, to her own “PnL”. 12 years later later Daly is mentor to five women and sits on the board of the APPG for Women and Enterprise. “Never before has there been a better time to be a female founder: we need to be positive about the here and now.”