Closing the gender investment gap for female founders in the UK

We often hear encouraging news about the growing number of women-led businesses and the rise of the ‘she-conomy’.

Female entrepreneurs have made their mark in the business world for many years – but despite the significant progress made, male founders are still awarded more equity than women.

This gender investment gap isn’t just a matter of equality – it’s also a barrier to potential growth and innovation in the UK.

Limited funding for female entrepreneurs means many are missing out on the potential to open new jobs and bring innovative ideas to market.

Thankfully, awareness of the funding gap is building as investors increasingly recognise that support for female-led businesses is essential for the economy.

But why do female founders face challenges in raising finance, and what can be done to close the gap between them and their male counterparts?

Female founders in the UK

The British Business Bank Equity Tracker Report 2023 illustrates the investment landscape for women, revealing that female founders were less likely to secure funding for their businesses.

The report, published annually, shows that all-female founder teams raised 162 deals worth £232m in 2023. 

This represents just 8.2% of deals in 2023, a decrease from 8.9% in the previous year.

In contrast, all-male teams raised significantly more, with 1,413 deals completed, totalling £6.5bn during the same period.

On an investment value basis, the share of equity investment value for all-female founder teams saw a modest increase from 2.0% to 2.8%, which aligns with the ten-year average of 2.5%.

Why closing the investment gap matters

Addressing this disparity could help to drive economic growth. According to The Rose Review, up to £250 billion of new value could be added to the UK economy if women had started and scaled new businesses in the UK at the same rate as men.

While the challenge of underinvestment in women-led businesses is a global issue, the UK is working to improve its support for female founders.

The government aims to increase the number of female entrepreneurs by half – the equivalent of around 600,000 entrepreneurs – by 2030.

One initiative is the Investing in Women Code, which was created to back more women-led businesses, including venture capital deals in firms with female founders.

Underpinning these objectives is the need to understand why the investment gap exists and what challenges are preventing female founders from assessing the finance they need to make their businesses successful.

Investment challenges facing female founders

Female entrepreneurs can face challenges from the very start of their business journey.

From a lack of female role models, childcare issues for working mothers, and gender stereotypes, there can be many obstacles to overcome.

Even after these initial hurdles, female founders face a range of challenges when looking for investment.

Some may be a result of gender bias, while others can be barriers that women themselves need to address.

They can include the following:

•    bias from male investors – only 13% of senior teams in UK venture capital firms are made up of women, while 48% of firms have no women at all, and this lack of representation impacts investment decisions. Improving the diversity of senior investment committees and professionals and encouraging female angel investors may go some way to addressing this issue.

•    a lack of financial knowledge – the Investing in Women Code Report 2024 highlights a need for the financial services sector to meaningfully address women entrepreneurs’ access to tools and resources as well as finance. This could reflect a broader need for financial education for women.

•    a lack of confidence – according to observations from Kings College London, women entrepreneurs sometimes suffer from ‘imposter syndrome’ – and are more likely to than their male counterparts – so may judge their ventures more harshly. Networking challenges can also come into play as women are less likely to know other entrepreneurs or have access to sponsors, mentors, or professional support networks.

•    not asking for sufficient funding – it’s possible that female founders are asking for too little from investors, however data suggests that this is changing. In 2021, the average amount of Angel investment being sought by all-female teams (£791k) was very similar to all-male teams (£823k), a big improvement from 2020 when all-female teams requested less than 50% of the amounts requested by male-only teams. And in 2023, the average funding requested by all-female teams was 40% higher than in the previous year.

•    the perception of being more risk-averse – while every entrepreneur is different, women may be perceived to be less risk-averse than men in general. A 2023 study suggests this could be the case, due to heightened sensitivity to potential losses. Conversely, men have been found to show greater optimism when it comes to their financial status and are, therefore, more willing to engage in risk-taking. This is perhaps not surprising considering issues surrounding gender bias and the historic lack of support for women in the business arena.

So, what steps can female founder take to improve their chances of raising the appropriate funding to help grow their business?

10 ways to overcome female funding challenges

1. Be fully prepared

Prepare your business plan and investment documents thoroughly, including a solid cash flow forecast ideally spanning the next 2-5 years.

A focused pitch deck that illustrates the business for potential investors or lenders is essential.

Investors and lenders will review these documents in detail, so it’s worth preparing them and seeking independent financial advice if this is not your area of expertise.

Demonstrate a comprehensive understanding of your business, including the competitive landscape and your projected growth.

Equity investors will also be considering their exit route, so it’s important to assess both short- and medium-term prospects and provide a realistic business valuation of the business.

Think about the timeline for investment, too – the process of raising finance can be time-consuming and demanding, so be prepared to be in it for the long haul.

2. Refine your ask

Ask for the amount your business truly needs to support its growth.

Asking for less could be counterproductive and costly, as a second round of investment would need to be made sooner.

Investors want to see requests covering the next 18-24 months, supported by accurate forecasts and documentation.

If your business needs £1 million, don’t hesitate to ask for it – what’s the worst that can happen?

If you get turned down, don’t be discouraged.

Instead, ask for feedback to understand why they chose not to invest and consider other potential investors – it might simply be a matter of timing or fit.

3. Perfect your pitch with confidence

To help ensure that your pitch is the best it can be, anticipate the questions investors will ask and consider how you will answer them.

Founders need to demonstrate a deep understanding of their business, including its unique selling point (USP).

To identify your USP, know what sets your business apart from competitors.

Ask yourself, what unique value do you offer that others don’t?

This could be a unique feature, a particular service, or a distinctive brand story.

Once you have identified your USP, detail it clearly to make your pitch stand out.

4. Identify the right investor

Look for investors who align with your vision, goals, and passion.

Finding the right investor means more than just securing funding. 

It’s about finding someone who will invest their time and provide access to valuable networks to help take your business to the next level.

Think about researching investors who have a track record of supporting female-led businesses – this can include looking for female-focused funding sources.

Don’t hesitate to use your network and ask for recommendations from other entrepreneurs to find the best fit.

5. Attend industry events, pitches and conferences

Say yes more – to networking opportunities, workshops, and panel discussions.

Go to as many events as possible to gain exposure to potential investors and showcase your expertise in a more relaxed setting.

Participate as much as you can because different platforms provide exposure and allow you to meet investors who may be open to funding your business.

Make sure to follow up with contacts you meet and try to build long-term relationships for your business.

6. Explore all funding options

Look into alternative funding sources to boost your business, such as government grants that work with your goals.

Also consider applying for business accelerators for access to expert guidance, potential investors, and a community of like-minded entrepreneurs.

Programmes like this can significantly boost your business growth and bring you closer to your funding goals.

7. Develop a supportive network

Building a knowledgeable and reliable support network is essential.

The people in your network should be able to support you as you grow your company, and having a strong team in your corner can help you drive the business forward.

When a female founder is surrounded by people who understand the journey of raising investment and who can take that journey with her, the chances of success are far greater.

Network as much as you can, and look into organisations that can support and inspire you, such as:

• British Association of Women Entrepreneurs – a not-for-profit network supporting women in business.
• Every Woman – connecting businesses and women worldwide.
• Fund Her North – a northern-based, volunteer collective.

8. Find a mentor

To find a female business mentor and inspiring role models in your industry, start by looking at your own personal business network.

For example, do you have an ex-boss or colleague who could mentor you?

If you don’t know anyone personally, what contacts do you have who could make an introduction?

Use LinkedIn to find and connect with experienced women in your field – engage with interesting posts to start conversations and business relationships.

Attend industry events, conferences, and seminars where successful women often speak, and join professional groups and online communities.

Also, check out local business incubators and accelerators that support female-led businesses, as they often offer mentorship.

9. Be ready to delegate

Don’t be afraid to delegate responsibilities to other team members so you can focus on the bigger picture – growing your business.

Beauhurst, an independent research company, suggests that the first investment round can take up to 15 months.

Not only is it a long journey, but it can also be lonely, so having the right team for your business is key.

10. Develop your resilience

Many female entrepreneurs fear failure, which can be a barrier to seeking investment.

Don’t be discouraged from pitching to investors, whether they are an all-male team or female founders themselves.

Most investors are focused on the growth potential of your business and the returns they can earn from their investment.

Plus, many male investors actively support female-led businesses.

Think of failure as a learning opportunity and be prepared to deal with setbacks – and even plan for them.

Ask for feedback from investors who have turned you down so you can be better prepared for the next pitch.