Gender funding gap narrows for second year in a row

Following news that the gender pay gap has reduced to its lowest level yet in the UK, new data from Startups suggests a similar, modest trend in the realm of venture capital funding.

The gender funding gap, a persistent hurdle for women entrepreneurs, has narrowed for the second year in a row, offering a glimmer of progress for female-owned businesses.

While the playing field remains far from level – male-founded startups still secure an average of nearly six times more funding – the data demonstrates a significant shift since 2022, when average funding was almost seven times greater for men.

Early-stage funding for women is growing at a much faster rate year-on-year, driven in large part by a rise in the number of angel investors backing women entrepreneurs.

State of gender funding in 2024

Using data from this year’s Startups 100 Index, we compared the amount of early-stage pre-seed and series funding gained by male- and female-owned startups in their first five years of operation.

Our results show that, on average, female-founded businesses now receive £1.05m in funding, compared to £6.2 million for a solely male-owned organisation.

The disparity means that men will get, on average, 5.9x the amount of early-stage VC funding that women will.

In keeping with previous findings, the addition of at least one male founder pushes the average amount of funding received up to £4.12m in 2024, suggesting that a male partner is still required for female founders to secure early-stage investment.

Positive progress

This year’s report is the third in a series on the gender funding gap run by the Startups team. While the 2024 results show a clear inequality between the amount of money men and women business owners can raise, year-on-year analysis tells a more optimistic narrative.

Over the last two years, women-owned businesses have increased their average funding by a staggering 64.4%, from just £644,000 in 2022 to over £1m this year; in a continuation of a positive trend for female entrepreneur funding.

Male-owned businesses also grew their average funding pot by 31.9%; an impressive achievement given today’s troubling fundraising landscape.

In a recent survey, one in ten firms told Startups that access to capital was their main concern in 2024, making it a top challenge for small businesses.

Angel investment vital for women entrepreneurs

Angel investment continues to be a much-relied upon funding source for women. Our data shows that 46% of female-led firms in the Startups 100 had been funded by angel investors,  a similar percentage to the amount of male-led (48%).

An absence of female decision-makers in the investment community has previously stalled progress for bridging the gender funding gap. According to the 2023 Alison Rose Review of Female Entrepreneurship, 14% of angel investors in the UK are women.

However, the Rose Review also shows that this minority figure has been instrumental in contributing £2.34 billion towards female entrepreneurs since 2012.

Government action nearly curtailed progress this year. In January, new laws came into force that raised the earnings threshold for a person to qualify for angel status to £170k a year.

Critics argued that the change would block women, who typically earn less, from becoming angel investors and limit access to funding for women-owned startups. In light of the backlash, the policy was rolled back in March.

Gender pay gap

Our findings follow government reports that the UK gender pay gap has shrunk to its lowest point since companies were mandated to report it in 2017.

The news remains a mixed bag. While women now earn an average of 91 pence for every £1 earned by a man, the disparity is far from erased.

In certain large companies, the issue is especially stark. At EasyJet Airline Company, for example, last year women’s median wage was only 36p for every £1 earned by a man.

Public sector pay also shows a gender divide. Here, 87.6% organisations pay men more than women, compared to just over three-quarters of private firms – a fact that led to a number of equal pay strikes at Scottish councils this week.

Despite these challenges, the combined data from the government and Startups offers a cautiously optimistic outlook. It suggests a potential shift towards a more equitable landscape for women in business, both in terms of pay and access to funding.