The startup gender pay gap: small business, big disparity

The world of startups thrives on innovation and disruption. Yet, a concerning trend continues to persist: a significant gender pay gap within these younger companies. 

While established businesses often face scrutiny for how to pay employees equitably, the issue seems even more pronounced among startups, raising questions about how innovative and forward-thinking they actually are.

The shocking reality: a gap wider than expected

Because large companies are legally required to report on their pay gap data, it is easy to identify which big firms are failing at the gender pay gap. However, there’s no denying that a gender pay gap also exists at smaller startup companies – as several studies have revealed.

According to Sifted, the gap in UK tech startups sits at a daunting 30%. This is more than double the national average and includes well-known platforms such as Revolut, Starling and Checkout.com. This means women in the same roles potentially earn a staggering 30% less than their male counterparts.

This issue isn’t confined to the UK. Research by Ravio found an 18-25% pay gap for women across startups in Europe – however, the EU is hoping to directly tackle this at the legislative level via the upcoming EU Pay Transparency Directive from 7 June 2026.

The US paints a similar picture. A report by PitchBook revealed that in 2022, only 2.3% of venture capital funding went to all-female founded teams. 

Unpacking the root causes: why does the gap exist?

Several factors contribute to this concerning trend. Here are some of the key drivers:

Unconscious bias in hiring and promotions

Studies suggest that unconscious bias during hiring and promotion processes can be a huge disadvantage to women. In spite of utilising the best HR and payroll software,  recruiters and managers might hold ingrained stereotypes about certain roles being better suited for men, leading to lower starting salaries and a slower promotion track for women.

Lack of transparency in compensation

Startups often operate in a fast-paced, informal environment. Compensation structures can be unclear, leaving room for negotiation – a skill often associated with men, leading to potentially lower starting salaries for women. 

Exploring the ethnicity pay gap and LGBTQ+ pay gap, we found research from the American Psychological Association that suggests experiencing of discrimination and lower pay can lead to a lack of confidence and belief that success is likely. This can reinforce the cycle of underrepresentation in higher-earning positions.

The funding conundrum

The gender gap in venture capital funding can have a ripple effect. Startups led by women may have access to fewer resources, impacting their ability to offer competitive salaries. 

This lack of investment in female-led startups perpetuates a system where women struggle to access the resources needed to scale their businesses. (we’ve also extensively covered how a lack of female funding alters the funding landscape) – and also struggle to offer competitive salaries to their teams, perpetuating the cycle. 

Sexism prevails, despite  women-led companies currently  outperforming male-led in the Fortune 1000 top companies.

The “Bro Culture” stereotype

Some startup cultures, particularly in tech, can be seen as dominated by a certain brand of toxicity or “bro culture” – an environment that can be less welcoming to women. This might lead them to leave for other opportunities or negotiate less aggressively. Startups should beware of this, however, as bro culture is cited as a factor in  WeWork’s bankruptcy

The “Mummy Track” myth

Societal expectations can play a role. Women are typically perceived as less committed due to potential child-bearing and childcare responsibilities, leading to lower initial salary offers. Conversely, if you are LGBTQ+ and a woman you may encounter the opposite problem, where people do not see you as a caregiver if there is “another mum”.

The investor effect

The tech startup world is dominated by male investors, and these male investors tend to ignore female founders. In January, new legislation was planned to increase the requirement for angel investors on platforms from £100k to £170k, which was dubbed “The New Glass Ceiling”, after it was found that it would disproportionately affect women founders and investors in the UK above everyone else. 

Fortunately, the government made a U-turn on this ruling after much campaigning and outrage. However, it reflects   a prevailing mindset where women in the space and their unique circumstances or issues are dismissed or overlooked. 

This lack of female representation at the investment level might lead to a funding bias towards male-led startups perpetuating the pay gap throughout the startups ecosystem. 

The “leaky pipeline” and experience gap

Women are underrepresented in science, technology, engineering and maths (STEM) fields, leading to a smaller pool of qualified female candidates for tech-oriented startups. 

According to Women in Tech, there are only 25% of women graduates in STEM subjects, and 52% are men. From there, women go on to make up only 34% of the workforce.

Beyond the numbers: the human impact

As we explain in our list of gender pay gap statistics, the wage gap is not just a statistical anomaly; it has real-world consequences for women’s careers and financial security.  Lower salaries can translate into a lifetime of lower earnings, impacting retirement savings and financial independence.

A culture that undervalues women’s contributions can lead to feelings of isolation, decreased motivation, and ultimately, a loss of talented individuals from the startup ecosystem.

Addressing the gap: moving towards equality

Fortunately, there are steps startups can take to bridge this gap and create a more equitable work environment:

1. Implement standardised pay scales: developing clear and objective pay scales based on experience and skills can help eliminate room for negotiation bias.
2. Diversity, equity, and inclusion (DEI) initiatives:  Make DEI a core value.  Actively seek diverse talent, implement unconscious bias training for leadership, and foster a culture of inclusion.
3. Transparency is key: be transparent about salary and promotion processes. This empowers employees to advocate for themselves and builds the organisational culture and trust within the organisation.
4. Support for working parents: offer flexible work arrangements and childcare support to create a more inclusive environment for working mothers and fathers.
5. Investing in women-led startups: venture capital firms can play a crucial role by actively seeking out and investing in promising startups led by women.
6. Promote transparency in compensation: startups can define clear compensation structures with published salary ranges for roles. This ensures fair pay based on qualifications, not negotiation tactics.
7. Implement diversity, equity, and inclusion (DEI) initiatives: creating a culture that celebrates diversity and provides equal opportunities for men and women is crucial. This includes unconscious bias training for leadership and standardised hiring practices.
8. Increase investment in female-led startups: venture capitalists and angel investors need to diversify their portfolios and actively seek opportunities to back female founders. This will create a more balanced ecosystem where women have access to the resources required for success.
9. Hold startups accountable: while mandatory gender pay gap reporting might not be in place for all startups, voluntary reporting can encourage greater transparency and hold companies accountable for their practices.

Conclusion

Even though there has been some positive progress on this issue lately, they are only small strides toward a more equitable future . The gender pay gap in startups is a pervasive issue that still requires  immediate attention. It not only disadvantages women but also stifles the growth of the entire startup ecosystem. We’ve identified the root causes and explored potential solutions, but true change requires action.

This isn’t just about policy changes. It’s about dismantling unconscious bias, challenging the status quo, and advocating for women in leadership roles. Every individual – from startup founders and investors to employees and consumers – has a role to play.