“Don’t start:” Why barriers to finance for female founders make us all poorer

Women entrepreneurs’ access to finance is still controlled primarily by men

Women founders still face persistent and systemic barriers in the UK’s tech startup ecosystem. If the government used the tools at its disposal to create more equitable access to finance, we would all benefit.

A new report has revealed the extent to which women-led start-ups face funding barriers that their male entrepreneur peers do not.

The report is from the Startup Coalition’s report Girls Just Wanna Have Funding: Addressing the Barriers to Finance for Female Founders, and it highlights the severity of the funding imbalance. Although all-female founding teams constitute nearly 14% of UK startups, they receive only 6–7% of equity deals and a mere 2.8% of total investment value.

The higher the sum the worse the disparity. For every all-female team raising £1 million or more, twelve all-male teams do the same, and for raises exceeding £10 million, the ratio balloons to 36:1 in favour of male teams.

Other data sources corroborate this trend. For example, women-led businesses in the UK secured barely 3% of venture capital funding in 2023, while all-male teams captured 82% of the capital. Female founders also face challenges in follow-on investments, with fewer women angel investors reinvesting compared to men, further limiting growth opportunities for women-led startups.

The vast gender funding gap isn’t just women’s problem. Limiting the growth of women-led ventures costs all of us in lost value to the economy. The Rose Review back in 2019 estimated the hit to the economy at £250 billion per year.

Bias against women founders makes us all poorer.

Former CIO and angel investor Laura Meyer is part of Angel Academe, which was set up specifically to invest in women-led businesses. She comments:

“We have an enormous amount of female talent and entrepreneurship in the UK, yet VC investment into female founded businesses remains dispiritingly low at around 2%. Why has the UK fallen to 18th place out of 33 OECD countries (lowest place in over 10 years) on its progress towards gender equality, as highlighted in PWC’s Women in Work index?

“As an angel investor myself, I see how many brilliant women are creating startups and I also see how challenging it is for women to fundraise. I’m a member of Angel Academe, an organisation which absolutely addresses this issue, and they have just launched the first EIS co-fund focussed on female founded tech startups, in partnership with SyndicateRoom. This is absolutely what we need in the UK and we desperately need to see more of it if we have any hope of improving the situation for women.”

No, it isn’t a pipeline problem

The narrative that that there are fewer successful women entrepreneurs because the pipeline of female business talent is somehow lacking is a persistent one, partly because it fits into the commonly told story of why there are proportionally so few women in the wider technology realm.

Despite being disproved by just about every serious piece of research ever conducted into the gender funding gap this narrative just will not die, although the Startup Coalition has done it’s best to hammer another stake in.

There is no shortage of women entrepreneurs. The shortage is one of equity, and it arises from systemic issues embedded deep within the investment ecosystem.

Nicky Wake, serial entrepreneur and founder of Don’t Panic Events, Chapter 2 Dating, SoberLove, and WidowsFire, said: “Despite having built and scaled a successful events business, stepping into the tech startup space was like hitting a reset button. Suddenly, I was pitching into a room where credibility didn’t seem to travel with me. I found it incredibly difficult to be taken seriously at male-dominated investor events and often couldn’t even get a foot in the door with traditional investment funds.”

Wake’s experience sums up the problem. The world of finance, venture capital and corporate investment is still heavily male dominated. Everyone has affinity biases – we tend to like people who are similar to us, so a male dominated panel of venture capitalists is going to favour people who look like them and think like them.

Other research has shown that biased gender perceptions of risk appetite are a problem, (male investors seeking quick returns are put off by women who they assume are more risk averse than they are) and women are penalised if they show traits such as confidence or aggression when the same traits are perceived positively when exhibited by male investors. If women show traits that are coded more feminine such as caution or a more community minded vision, they’re penalised for that as well.

Women literally can’t win.

Public funding bodies like Innovate UK and the British Business Bank exist to support smaller ventures with public money, but these organisations, despite being funded by taxpayers of both genders neither collect nor publish gender-specific data on how they have allocated funds, with the result that they can’t be held accountable for biased decisions.

Compounding the problem is that fact that government-run grant schemes usually require matched funding from the private sector, and we’ve already established that women entrepreneurs find that much harder to acquire. Women also tend to have fewer high-value assets in their own names which limits their ability to finance debt.

Looking outside the financial system, women still also must overcome systemic barriers related to caring responsibilities. Whilst men become fathers, it is still women who bear the disproportionate of childcare responsibilities. There is a weight of evidence to suggest that subsided childcare helps to grow economies by helping women to work outside the home, but successive UK governments have tinkered at the margins of this problem, as childcare costs have soared.

Call for Change

Addressing these barriers requires coordinated government intervention, regulatory reforms, and cultural shifts within the investment community. The last of these is very difficult to effect from the outside, but the Startup Coalition report calls for the following government action including:

• Clear guidance from regulators and development banks to prevent discriminatory investor practices
• Making the Investing in Women Code mandatory for public funding recipients
• Better access to grant funding and angel investing for female founders
• Childcare reforms that support women in entrepreneurship

Bella Rhodes, Talent Policy Lead at Startup Coalition, criticises the pipeline narrative in her comment on the research.

“It’s time to stop blaming the pipeline and start fixing the system. The funding gap for women founders isn’t a side issue—it’s a structural market failure that’s holding back innovation, productivity and economic growth. The UK startup ecosystem is full of talented women with brilliant ideas, but they face biased, outdated and opaque funding processes that too often shut them out. If we’re serious about building a truly innovative economy, we need to back female founders—and the Government has the tools to make it happen.”

Nicky Wake emphasises the importance of other women when it comes to funding. She says:

“The barriers women face in tech funding are real, and they’re systemic. But what’s equally real and powerful is the way women are responding. I turned to my own network and was able to raise investment from a group of incredible high-net-worth individuals, including five women, four of whom had never invested before. That speaks to a growing movement: women backing women, creating our own pathways, and reshaping the industry from the ground up. I would love for the wider investment community to recognise the immense value women-led startups bring and to be more intentional about opening doors, not just for us, but for the generation coming next.”

Wake’s optimism is energising, and organisations such as Angel Academe are doing what they can to redress the VC gender imbalance, but they can’t affect change on the scale needed on their own. Finance and investment culture will not change organically from within. The only way to remove the structural barriers women entrepreneurs face and foster equitable access to finance, is for government to start collecting data, acknowledge the problem and start using the tools at its disposal.

Katie Gallagher, Chair of the UK Tech Cluster Group and MD of Manchester Digital, says time is of the essence.

“I hugely welcome this report released by Startup Coalition, which highlights the ongoing lack of support and VC funding for female founders, “says Gallagher. She continues:

“Financial support for female founders is absolutely critical and non-negotiable now in order to grow the UK’s tech economy. Quite frankly, it’s a disgrace to the tech industry that women find it so difficult to gain VC funding, and especially that women of colour find it even harder again to secure funding.

“As mentioned, a report from HM Treasury itself found that closing the gender gap in entrepreneurship could add £250billion to the UK economy - which in turn benefits everyone, so it’s a no brainer that Government and VC funders should utilise the recommendations suggested by Startup Coalition.

“What we need to see is firm action from the whole tech industry to make a real impact in changing the gender balance of the tech ecosystem - and importantly, see more VC funding flowing to female-led startups as a matter of urgency.”

The Women in Tech Excellence Awards will be held on 27^th November, with categories including Founder/Entrepreneur, Role Model and Woman of the Year. Nominee longlists are out now! Click here for further details.