The decade of disparity: female founders still get less investment (2023)

A recent study conducted by the British Business Bank has shown that there has been no improvement in the value of investment deals directed towards all-female founder teams over the past decade.

Despite a record high of 27% of deals going to teams with at least one female founder, all-female teams accounted for only 9% of deals in 2022 and received a mere 2% of funding, demonstrating no progress since 2011.

The report highlights the persistent lack of diversity in venture capital investment and presents actionable pathways to address the issue. It reveals that women, individuals from ethnic minority backgrounds, and those from lower socio-economic backgrounds face significant barriers in receiving venture capital investment compared to their male, white, or “elite” university-educated counterparts.

Progress is slow, but there is hope

In spite of the overall lack of improvement, there are some positive indicators of improving diversity in investment deals. The report shows that: 

• 13% of first-time equity deals were awarded to all-female teams in 2022
• 10% of those went to all-ethnic minority teams
• All-ethnic minority teams also received 19% of first-time investments 

Furthermore, founding teams with at least one ethnic minority founder accounted for 42% of the investment value of first time deals in 2022, a significant increase from 14% in 2013.

Navigating the path forward

In response to the report’s insights, gathered from 40 VC investors and 124 venture-backed businesses – The British Business Bank identified three key pathways aimed to enhance diversity in venture capital investment:

Promoting diversity at the top: increasing diversity within venture capital firms can lead to better investment decisions and foster a culture of inclusion for both diverse founding teams and venture capital staff. Diversifying leadership can help overcome biases that may exist within homogeneous groups.

Fostering inclusion in the investment pipeline: venture capital firms should actively seek out diverse founding teams and provide them with opportunities to secure funding. Networking events held during office hours, accommodating family care responsibilities, and engaging with accelerators are effective ways to identify high-potential business propositions from underrepresented groups.

Embracing transparency and accountability: venture capital firms must prioritise transparency and accountability to drive change and enhance diversity. Participating in industry-wide surveys, clearly communicating investment strategies, commitments to diversity and sharing ambitions to increase deals with underserved entrepreneurs are crucial steps.

Conclusion

The report highlights the need for increased access to investment for diverse founders. 

As Louis Taylor, CEO of the British Business Bank, emphasises: “The journey of raising venture capital can be challenging – but for under-served entrepreneurs, the barriers can be far higher and this needs to change.” 

Are you a woman seeking venture capital for your business? Check out our guide to the UK venture capitalist firms offering funding to female-founded startups in 2023.