The UK’s push for female entrepreneurship in tech

More women are launching and founding businesses in the UK than ever before despite the barriers that exist for female entrepreneurs. Perhaps the most significant is the inequality in access to investment. This limitation not only restricts new business growth but also perpetuates existing gender imbalances among early-stage technology ventures. There is a vast amount of unrealised potential in female founders, with the Rose Review estimating that £250b could be added to the economy if women scaled and advanced businesses at the same rate as men.¹ Research released by asset manager BlackRock in November 2023 indicates that companies with more diverse workforces, in terms of gender representation, surpassed their less-diverse peers in return on assets by an average of 29% over recent years.² Despite such findings, there is a long way to go in reaching complete gender parity in the business landscape, as women face more challenges in entrepreneurship than their male counterparts. In a mission to diversify the business ecosystem, the UK has seen initiatives such as the Investing in Women Code (IWC), working to reduce gender-based disparities in the entrepreneurial community and bolster the UK economy.

The fundraising landscape

The number of active high-growth tech companies in the UK has more than doubled in the last decade to just shy of 15,000 as of October 2023. While this signals the popularity of tech-enabled businesses, companies with a woman founder only account for 21.4% of the population. Even though women are as successful as men in sustaining business once established, they are less likely to pursue entrepreneurship.³ Women who do pursue entrepreneurship are less likely to seek debt funding or apply to support programmes such as accelerators, which often serve as a pipeline to further investment.⁴ Traditional gender conventions and a lack of representation in financial leadership positions contribute to the low number of women entrepreneurs in the UK. Two of the women-led enterprises recognised by the Fast 50 Women in Leadership awards this year are Diginius and GoSpace AI. The overall Women in Leadership winner, Diginius, has developed a digital performance software platform to support clients from marketing agencies to e-commerce brands. It was co-founded in 2011 by COO Juliana Burke and CEO Nate Burke. GoSpace AI ranks second in this year’s Women in Leadership category. It uses AI to allocate office space to teams when they need it, reducing unused space. It was co-founded in 2014 by CIO Elizabeth Tweedale and CEO Bruce Davison. Since its establishment, the business has secured £3.54m in equity investment.

Global events such as the Russian-Ukrainian war, supply chain disruptions, and a rise in inflation have contributed to more cautious investment strategies, leading to a 10.1% decline in investment in 2022. Amidst an economic downturn, tech-enabled companies remained resilient, raising an impressive £20.7b in equity investment. Male-led enterprises accounted for 89.4% or £18.5b of the total, whereas women-led businesses raised £1.68b or 8.11% of the total. The lower proportion of enterprises led by women in the tech population is a primary outlier in the disparity in investment raised by male and women-led companies.

Creating equal opportunities

With greater access to mentoring and business support programmes, the UK has the potential to create a women-friendly workforce and boost economic activities. For instance, accelerator programmes - initiatives that support entrepreneurs and founders in scaling their businesses - can enhance female entrepreneurship by developing effective measures to create equal opportunities.⁵ Beauhurst data shows that male-led companies that had historically attended an accelerator programme accounted for 44% of total investment in tech companies in 2022, in contrast to 2.79% for women-led companies. Women-targeted programmes such as Barclays Eagle Labs Female Founder Accelerator are working to bring more women into entrepreneurship through mentorship classes, teaching women how to value their businesses, interact with investors, and network with a broader community. While disparities in funding continue, the data shows a shift in the landscape, suggesting a promising future for women in entrepreneurship. A more granular analysis reveals that investment in women-led businesses operating in the tech landscape has surged significantly from £692m in 2018 to £1.68b in 2022. The most popular technology-based sector for investment is internet platforms, participating in over 1,000 deals in the past decade, followed by mobile apps (780) and SaaS businesses (736). This remarkable growth can be attributed to the growing presence of women entrepreneurs delving into the technology landscape, heightened interest from investors, and consumer appetite for digitally-driven products and services.

Blockers

Having women in rooms where decisions are made is paramount to growing the UK economy and creating an ecosystem where women in business can flourish. Lack of representation in the investment landscape, particularly in investment teams and committees, influences the rate women-led companies raise and pitch for equity finance. On average, women launch businesses with 53% less capital than men, are less aware of funding opportunities, and are less likely to take on debt.⁶ Loubna Bouarfa, the founder of OKRA.ai - last year’s Women in Leadership Winner, emphasised the importance of representation in the entrepreneurial community - “It’s really important for women to be a part of the new revolution in AI and technology.”

This year’s Women in Leadership Winner, Diginius touches on access to funding and the importance of investor and employee relations during the early stages of development. Speaking to co-founders Nate and Juliana Burke, they recall “not knowing how long the investment journey would be.” While the company has not raised investment via VC, it has managed to secure £1.68m in equity investment from private and angel investors. Despite deciding not to take on VC funding, the SaaS company has grown at an impressive rate, now working with over 600 agencies in 56 countries. Recalling back on the journey so far, Juliana notes how amazing the company has performed over the years with little funding and few employees.

Representation

Diversified leadership teams are necessary to enhance fundraising experiences for women entrepreneurs and business owners. Greater diversity in teams and committees is associated with more successful outcomes and greater returns. Juliana Burke further draws attention to the pivotal role their board and advisors have played in the company’s growth. Interestingly, the two founders highlight how the company’s relationship-driven culture has allowed them to rely upon and learn from their advisors.

The IWC’s annual report recorded that in angel groups with a higher percentage of female investors, the majority of their total investment went into all-female teams.⁷ Suggesting that in instances where women make up part of an investment team, women entrepreneurs are likely to have greater access to equity finance—illustrating the significance of gender representation in the entrepreneurial community.

The UK Business Angel Association’s (UKBAA) Angel Investment Task Force established the Women Backing Women campaign in 2022 to increase the number of women angel investors in the UK. This campaign also aims to improve the fundraising experience for women. IWC is a government initiative designed to improve access to finance for women in business. Its latest annual report reveals that IWC signatories account for just under 40% of venture capital deals in the UK and that a higher proportion (35%) of VC deals by IWC signatories involve at least one female founder compared to the broader market (27%).⁸ By creating avenues where women can access mentoring, tools, and finance, initiatives such as IWC show that by increasing representation in financial communities, the UK can work toward creating a more inclusive and women-friendly entrepreneurship ecosystem.

Conclusion

Access to finance remains a significant barrier to women in entrepreneurship. As more women venture into the business landscape, the UK has seen a redoubling of efforts from government and financial institutions to level the playing field for women. The emergence of projects targeted at supporting and enhancing female entrepreneurs highlights the desire and need for a dynamic business ecosystem. While there is still a long way to go in equalling the fundraising landscape for women in business, the future is promising.

FOOTNOTES
¹ The Rose Review of Female Entrepreneurship, 2019
² Lifting financial performance by investing in women, 2023
³ The Rose Review of Female Entrepreneurship, 2019
⁴ The Good, the Bad, and the Path Forward, 2023
⁵ How and why accelerators enhance female entrepreneurship, 2023
⁶ The Rose Review of Female Entrepreneurship, 2019
⁷ Investing in Women Code Annual Report, 2023
⁸ Investing in Women Code Annual Report, 2023