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Female and diverse founders in the UK
The Current Landscape
Female and diverse founders bring unique perspectives and innovative solutions to the table, driving economic growth and fostering inclusive business practices. However, they remain significantly underrepresented in the venture capital (VC) ecosystem. In 2023, all-female founder teams raised just 8.2% of deals, amounting to £232 million. This disparity is even more pronounced for minority founders, who face additional layers of bias and exclusion.
Challenges Faced by Female and Diverse Founders
Gender Bias and Stereotypes: Female entrepreneurs often encounter biases that can hinder their access to funding. Investors may unconsciously favour male-led startups, leading to an unequal distribution of venture capital. This bias is reflected in the types of questions investors ask during pitch meetings, focusing more on risk and prevention when speaking to women.
Promotion vs. Prevention Questions: Research has shown that VCs tend to ask men "promotion" questions, which focus on the potential for gains and growth. For example, "How do you plan to scale your business?" or "What are your projected revenues?" Conversely, women are more likely to be asked "prevention" questions, which focus on risks and potential losses. Examples include, "What are the risks involved in your business?" or "How do you plan to prevent failure?"
Personal Life and Commitments: Female entrepreneurs may face questions about their personal life and commitments, such as "How will you balance running a business with family responsibilities?" These questions are rarely posed to male entrepreneurs
Leadership and Experience: Women might be asked to justify their leadership capabilities and experience more frequently than men. Questions like "Do you have the necessary experience to lead this company?" or "How will you handle leadership challenges?" are common
Financial Prudence: Female founders often encounter questions that imply a need for financial prudence, such as "How will you manage the budget?" or "What steps will you take to ensure financial stability?"
These differences in questioning can create an uneven playing field, as prevention-focused questions can lead to more cautious responses, potentially affecting the perception of the business's potential and the amount of funding secured.
Access to Funding: Securing funding is a significant hurdle for all entrepreneurs, but it’s often amplified for under-represented founders. Research indicates that women-led startups receive a disproportionately small share of venture capital investments compared to their male counterparts. In 2023, all-female founder teams raised significantly less than all-male teams, which secured £6.5 billion during the same period.
The Impact of Underinvestment
The lack of investment in female and diverse founders not only limits their potential but also hinders innovation and economic growth. Diverse teams are more likely to create products and services that cater to a broader audience, better positioned for success in a global marketplace. By not investing in these founders, the VC ecosystem misses out on significant opportunities for high returns and impactful solutions.
Solutions to Bridge the Investment Gap
Increase Representation in VC Firms: Having more women and underrepresented individuals in decision-making roles directly impacts funding allocation. Women investors are twice as likely to invest in women founders, making diversity in VC firms crucial for changing investment patterns.
Expand Women-Focused Initiatives: Programs that support female and under-represented founders, such as mentorship and networking opportunities, can provide the necessary resources and guidance to navigate the funding landscape.
Increase LP Accountability: Limited partners (LPs) should hold VC firms accountable for their diversity metrics and encourage investments in underrepresented founders. If investment in women led businesses are a significant minority then those challenging questions needs to be asked into how they decide on their investment portfolio and why that representation is not balanced
Widen Access to Tech Entrepreneurship: Providing access to tools, resources, and finance for diverse founders can level the playing field. Initiatives like the #FoundedbyHer program by KPMG Private Enterprise help women prepare for their Series A fundraise by equipping them with knowledge and networks.
I recently read Martha Lane Fox's Blog on Substack and I felt like she was venting frustrations that I also felt when the topic of International Women’s Day came up; It was titled: We can’t afford to celebrate International Women’s Day in the tech sector
Martha Lane Fox's blog highlights the alarming regression in diversity, equity, and inclusion within the tech sector. She notes that despite three decades of efforts, there has been no meaningful change in the relationship between the sector and women. In fact, the situation has worsened, with major companies abandoning their diversity targets. This retreat from diversity commitments is not merely about economics or restructuring but reflects a shift in priorities, where women and marginalized groups are no longer seen as essential.
Globally, women make up just 26% of the tech workforce, with even lower representation in AI and data roles (12%) and leadership positions (14%). In the UK, the picture is equally bleak, with women holding only 20% of software engineering roles and just 21% of senior positions in tech. These statistics represent missed opportunities for innovation, creativity, and growth.
Martha emphasizes the importance of diversity in driving better financial performance, citing research that shows mixed and diverse teams lead to a 20% increase in profit. Female-founded scaleups in the UK invest 38% of their raised capital into R&D, making them twice as innovative as typical firms. Despite these clear benefits, companies are dismantling programs designed to level the playing field, often citing changing political climates or economic pressures.
Conclusion
While female and diverse founders face significant challenges in securing investment, their resilience and innovation continue to drive change in the entrepreneurial landscape. To foster a more inclusive and prosperous future, several specific changes are necessary:
- Increase Female Representation in Leadership: Companies must prioritize hiring and promoting women into leadership roles, ensuring that decision-making bodies reflect the diversity of the workforce.
- Provide Targeted Funding and Support: Venture capital firms should create funds specifically aimed at female and under-represented founders, offering not just financial support but also mentorship and resources.
- Promote Inclusive Work Cultures: Companies need to cultivate inclusive environments where diverse voices are heard and valued, addressing any cultural barriers that may exist.
- Enhance Education and Training: Invest in programs that encourage women and minorities to pursue careers in tech and entrepreneurship, starting from a young age and continuing through professional development.
By addressing these areas, the VC ecosystem can unlock the immense potential of female and diverse founders, driving innovation and economic growth for all.
Want to talk more on this subject or just want to reach out to expand your own founder network? Drop me a line at [email protected]
techUK’s TechTogether campaign, taking place throughout March, is a collection of activities highlighting the UK’s technology sector pursuit to shape a more equitable future. In 2025 we are exploring: Inclusive AI, investing in diverse founders and entrepreneurs, the power of allyship and mentorship, and empowering young people.
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Sian Wilson
Sian Wilson, is the Co-founder and Executive Director at Day One. Day One is a technology driven recruitment as a service company (RaaS) that tackles the inefficient parts of hiring while empowering companies to hire better. Over the past 15 months, she has been on a journey as one of 3 female co-founders in bringing a new way of hiring to the market that reduce cost, time and risk of hiring.