Raising Investment, Is It Harder for Female Entrepreneurs?

Women Entrepreneurship Investment

Headlines on the rise of female entrepreneurs suggest that the entrepreneurial arena is leading the way in promoting gender equality, however major barriers remain.  This report explores the obstacles women face when securing investment to start-up or grow their business.

Entrepreneurialism in the UK has risen far faster among women than men in the past decade. Aston University released a study of Global Entrepreneurship Monitor (GEM) data [1]. Comparing 2003-6 and 2013-16, the number of female-led business ventures rose by 45%, compared to just 27% among men.

While this seems progressive towards closing the gap and achieving gender equality within businesses in the future, overall, men are still nearly twice as likely to be entrepreneurs (10.4% of men versus 5.5% of women). The same study reveals the North East represents the lowest statistics in the country, with only 2.8% of women likely to be entrepreneurs.

These disparities can be partly explained by the persistent barriers which female entrepreneurs face when trying to secure investment.

A report [2] published by The Entrepreneurs Network found that in 2016 only 9% of funding into UK start-ups went to female-led businesses. That is £358.4m compared to the £3,580.0m received by male-led businesses. Men are 86% more likely to be venture-capital funded and 56% more likely to secure angel investment than their female counterparts.

In 2016 only 9% of funding into UK start-ups went to female-led businesses.

The reasons for these disparities are multifaceted but certainly do not suggest that males are in any way better entrepreneurs than females, or that females lack the skills to start-up or scale a business. In fact, women possess all the required skills and are equally able to make excellent leaders, and to build and scale. Studies also suggest that female led businesses are less likely to fail. The same report published by The Entrepreneurs Network, found 23% of female founders have seen their business go under, compared to 34% of male entrepreneurs. Moreover, on average female entrepreneurs bring in 20% more revenue with 50% less money invested.

So why do females struggle to secure investment?

On average female-led firms tend to be more highly-concentrated in lower-growth industries [3], such as health, retail or service-based sectors and those which do not typically attract VC interest. There is a known discrepancy of females drawn into specific sectors, for example as recently as 2016, females only made up 21% of the STEM (science, technology, engineering and maths) workforce [4].

A further explanation behind the disparities in investments lies with the fact that the majority of investors are male. A 2017 study [5] by the non-profit partnership Diversity VC, reveals that only 13% of all decision-makers in VC firms are women.

One PNE Enterprise client, a young female entrepreneur who wishes to remain unnamed as she is seeking investment, shared her experience of pitching her business (a female orientated service) to investors, “There is huge polarisation in the way male investors assess the business compared to females. Female investors tend to say ‘why isn’t this being done already’ whereas male investors spend a lot more time trying to understand the concept.”

“I was told by a VC that they didn’t invest in sole founders… Needless to say all their existing sole founders were male.”

Investors unconsciously tend to invest in companies that they understand or in entrepreneurs that look, speak and act like them.

“Since our launch we have had brilliant customer traction, pretty much from day one. We have achieved national press recognition and 40% growth month on month. Yet every male investor seems to start by saying “my wife thinks this is a great idea” as though our numbers alone weren’t enough.”

If the unequal ratio of male to female investors is a main driver of the gender investment gap, then should more females be encouraged to invest? According to the Centre for Economics and Business Research (CEBR), Women own over 48% [6] of the UK’s net wealth, yet only make up 14% [7] of angel investors across the nation. It is clearly not an issue of lack of finance, but more about today’s investor culture.

Women own over 48% of the UK’s wealth, yet only make up 14% of angel investors across the nation.

Sophie Jarvis, Head of The Female Founders Forum, a group of some of the UK’s most successful female entrepreneurs, states “There is significant evidence to support the fact that the funding gap is influenced to a large extent by unconscious biases from investors to the detriment of women.”

Repeatedly across women’s accounts of their experiences in front of investors, concerns relating specifically to their gender, such as their ‘confidence’, ‘pushiness’, and ‘potential family commitments as a distraction’ are called upon by VCs as reasons not to invest.

Our PNE Enterprise client recalls one case in which she felt a gender bias was particularly obvious;

“I was told by a VC that they didn’t invest in sole founders, I had researched their portfolio extensively before going into that meeting and I knew that they had several companies being run by sole founders on their books so I pressed them for more information and was told that ‘it’s a risk working with sole founders because you don’t know how their priorities might change over the next 5 to 10 years’. Needless to say all their existing sole founders were male.”

The facts speak for themselves: women face greater difficulty in securing investment than men.  The reasons why can be proposed and debated – but what is essential is working to breakdown the biases, enabling female entrepreneurs to start-up and grow their businesses, and fulfil their full potential.

Unlocking female potential

While access to finance is an issue, many argue that it is not the only problem faced by women entrepreneurs. Addressing and overcoming the gender gap in entrepreneurship can unleash a wealth of ingenuity and creativity that will itself trigger further entrepreneur-led growth.

The UK is missing out on a potential £10.01 billion boost to the economy due to the untapped potential of women.

A study conducted by Facebook, compiled by Development Economics and YouGov [8], found that the UK is missing out on a potential £10.01 billion boost to the economy due to the untapped potential of women wanting to start their own business. Furthermore, if the barriers were removed, and women had the support required to make their ventures possible, an estimated 340,000 new businesses and 425,000 new jobs would be created.

Not only this, but gender related barriers feed into the greater issues of inequality facing the business world today. In line with the UN Sustainable Development Goals, challenging these issues and working to overcome them is central to our purpose at PNE Group.

We believe that all entrepreneurs should be given equal opportunities. Whether or not a business can start-up and grow should never be about gender, the focus should always be on the potential of the entrepreneur and the business.

We are keen to hear your feedback on this issue. Whether as a female entrepreneur you have a similar story of the struggles faced in trying to secure investment. Or you are able to shed light on the topic from the point of view of an investor.

We are keen to hear your feedback on this issue. Whether as a female entrepreneur you have a similar story of the struggles faced in trying to secure investment, or are able to shed light on the topic from the point of view of an investor, you can get in touch at billie.jenkins@pne.org.

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Article references:

[1] Aston

[2] Squarespace

[3] FSB

[4] Fleximize

[5] BVCA

[6] The Guardian

[7] Growth Business

[8] Brookson One