There are more female founders than ever. Why are they only getting 6% of VC funding?

If women in the UK could match men in starting and scaling businesses, £250bn could be added to the economy.

2022 was a good year for women in business.

In fact, as years go, it might have been the best ever.

Women in the UK launched more than 150,000 new companies in 2022 — that’s double the number launched just four years earlier in 2018.

Young entrepreneurs were particularly busy, with 16-25-year-old women founding close to 17,500 businesses in 2022 — that’s more than 22 times as many as in 2018.

And all-female-led companies made up 20 per cent of businesses in the UK in 2022 — that’s up from 16 per cent in 2018.

All in all, female entrepreneurs and business leaders had a pretty fantastic year of growth.

That’s definitely something to celebrate.

But despite there being more female founders than ever before, all-female-led businesses still only received around 6 per cent of venture funding in 2022. 

According to the British Bank, for every £1 of equity investment in the UK in 2021, all-female-founder teams received just 2p.

So does that mean women should endeavour to find a man to join their founding teams?

That could help a bit, but not all that much in the grand scheme of investment.

All-male-founder teams received more than five times as much funding as all-female-led teams and mixed-gender teams combined in 2021 — all-male-led companies won the bulk of the funds at 84p per £1, and mixed-gender teams got the remaining 14p.

According to a recent report from the Rose Review — a government-backed review of female entrepreneurship headed up by NatWest CEO Dame Alison Rose — it doesn’t exactly look like access to funding is heading in the right direction as things currently stand.

Funding has been an issue for founders across the board, but 50 per cent found of female-founder teams found access to funding and investment difficult over the past 12 months compared to 40 per cent of their male counterparts.

44 per cent of female leaders also expect fundraising to become more difficult this year, not less.

Even though the number of female founders is booming in the UK, and on an incredibly positive upward trajectory — in large part thanks to initiatives like the Rose Review —  clearly there is potential for this number to skyrocket if women were on equal footing with men in terms of access to funds, education and opportunities.

Women currently make up just 14 per cent of the overall UK angel investing community.

Luckily, the Rose Review is committing to growing that pool to 30 per cent by 2030 through the work of the Women Angel Investment Taskforce.

It is also aiming to offer three million business support opportunities over three years for female founders across demographics and sectors.

Hopefully, with more women controlling the funds, more female founders will have access to the cash they need, because there is a whopping £250bn of new value that could be added to the UK economy if women could start and scale new businesses at the same rate as men do.

It is well known that elevating women, particularly across business and finance, is not just a win for women but a win for everyone. It just makes financial sense.

Yet women in finance are still working one-third of the year for free.

The gender pay gap for all employees is currently 14.9 per cent, which means that the average working woman effectively works for free for almost three months of the year compared to the average working man.

The pay gap is largest for women in finance, who work the equivalent of 114 days — or nearly a third of the year — for free.

At the current rate of progress, it will take more than 20 years to close the gender pay gap, and there is £250bn of untapped economic value waiting to be added.

With International Women’s Day quickly approaching, Wednesday 8 March, now seems like the perfect time for companies, investors and founders to look around and figure out how to get more money into female-founded businesses.

And to make sure that on International Women’s Day 2024, women in finance don’t spend the day working for free.